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What is a condo mortgage, and how does it work?

These loans can be trickier to get than typical mortgages

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Condominiums come with unique benefits and responsibilities that set them apart from other housing units. Condos are neither single-family homes nor apartments; typically, they’re large properties with multiple units, each owned individually.

Often, a condo is a good choice for folks who prefer convenience. A potential trade-off, though, is the process of getting a condo mortgage. The requirements for condo mortgages are stricter than those for single-family homes, and the rates are higher. Also, there are costs associated with condo mortgages that buyers usually don’t have to pay with a traditional home loan.

If you’re considering buying a condo, learning about condo mortgage requirements is crucial. Here’s what you need to know about how these loans work.

How do condo mortgages work?

Obtaining a condo loan is typically more complex than getting a mortgage for other types of property. This is because a condo’s value is subject to specific factors, many of which aren’t controlled by borrowers. Mortgage companies in the U.S. have higher eligibility criteria for condo loans to account for these risks, making qualifying for a condo loan a relatively complex process.

Obtaining a condo loan is typically more complex than getting a mortgage for another kind of property.”

During the underwriting process, the lender or bank reviews your finances and the financial state of the condo association for the unit you’re interested in buying.

The bank considers the following factors:

  • Percentage of rented units versus occupied units
  • The amount of capital held for maintenance
  • The space designated for nonresidential activities (such as on-site gym, swimming pool and laundry facilities)

These requirements will vary depending on the mortgage you’re going for.

Types of condo loans

There are several types of condo loans. The most common types include:

FHA loans

If you’re a first-time homebuyer and need a loan with a low down payment requirement, you might opt for an FHA loan. It requires only a 3.5% down payment from qualified buyers. You can look for approved condos using an online tool provided by the Department of Housing and Urban Development.

VA loans

This type of home loan helps veterans, military members and their families purchase a home without a down payment. The VA has a list of approved condos, but you may also be able to buy a condo not on the list by submitting a proposal to the agency.

USDA loans

The USDA loan program lets eligible purchasers in qualified rural locations buy a condo or home without a down payment. Just as with FHA and VA loans, the condo must be an approved property or you have to receive approval from the USDA.

Conventional financing

Conventional condo loans are subject to approval by the private lender. A conforming conventional loan must meet guidelines from Fannie Mae, Freddie Mac and the Federal Housing Finance Agency.

Jumbo loans

This type of mortgage exceeds the loan limit for conforming loans. You can get a jumbo loan to obtain a condo mortgage. The requirements are typically a bit stricter than for other conventional loans. Jumbo condo loans are used for high-value condos, like luxury condos.

Condo loan requirements

Qualifying for a condominium loan largely depends on your financial situation and whether the condo you choose meets the standards of the lender.

The income and credit score you need to qualify vary by loan type. For instance, to get an FHA loan, the lowest credit score you can have is 500; USDA and VA loans do not have a minimum credit score.

FHA requirements

Generally, to be approved for a condo loan, the FHA requires that your condominium meet the following requirements:

  • At least 50% of the condo units have to be owner-occupied.
  • 50% of the units should be FHA-insured.
  • Nonresidential space should not exceed more than 35% of the total floor area of the condo project.

VA requirements

To qualify for the VA loan program to buy a condo, the unit must meet the following criteria:

  • At least 35% of the units must be owner-occupied.
  • Only 10% of the units in a condo project can pay homeowners association fees 60 days late.
  • The condo association needs to provide financial records for the past three to four years.
  • At least 20% of the association’s budget must be for repair and maintenance work.

USDA loans

The USDA loan has similar guidelines to those set by the FHA and VA loans, including:

  • The condo must have flood insurance coverage if it’s located in a risky area.
  • The condo must be structurally sound.

Conventional financing

Fannie Mae and Freddie Mac have guidelines much like those set by the FHA and VA for financing condos, with minor differences:

  • Only 15% of the units in a condo project can pay homeowners association dues 60 days late.
  • At least 10% of the condo funds must be for maintenance.

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    Pros and cons of a condo

    Condos are a popular option with those who appreciate apartment-style living, shared spaces and limited maintenance and repair responsibilities. If you want your own yard — and to take care of it — then a condo might not be for you. Condo living also means depending on a property management company to take care of the property.


    • Less maintenance
    • Priced lower than single-family homes
    • Community feeling
    • Often located in vibrant downtown areas


    • Homeowners association fees
    • Can be challenging to sell
    • More difficult to get a condo mortgage than single-family home loan

    Bottom line: Is a condo mortgage worth it?

    Condos can be a good investment for many, but they do come with stricter mortgage approval guidelines. They are generally cheaper than single-family homes, though, so if you’re willing and able to pay those higher rates, you could save in the long run. Just know that you’ll have to deal with monthly association fees on top of a potentially more difficult loan process.

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