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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 offer many of the same benefits as single-family dwellings — but without all the maintenance and upkeep that traditional homes require. Condominiums also tend to be less expensive than traditional homes, which adds to their appeal. The National Association of Realtors (NAR) points out that the median existing condo price nationally worked out to $337,300 in March 2023, whereas the median price for an existing single-family home was $380,000.

NAR’s 2022 Profile of Home Buyers and Sellers also revealed that condominiums are popular with senior citizens, with 17% of buyers over the age of 60 buying a condominium.

If you're considering buying a condo over other housing options, you do need to know that mortgage interest rates tend to be higher for condos than for single-family homes. There are also additional barriers associated with condo mortgages that buyers usually don’t have to face with traditional home loans.

Here’s what you need to know about how condo loans work.

Key insights

  • A condominium is a home located within a larger building or complex of other housing units, each of which is separately owned.
  • A condominium owner has ownership of their individual unit and its components. Other areas of their building or complex — like lobbies, hallways and outdoor spaces — are all shared spaces.
  • Condo mortgages are often more difficult to get due to the extra layer of risk they carry for lenders.

What is a condo?

Before diving into the ins and outs of condo mortgages, you should know what sets condominiums apart from other types of housing. Generally speaking, a condominium is a home you own within a building or complex of buildings that features multiple units. The U.S. Census Bureau notes that condominiums are distinguished from other types of housing because they’re individually owned but share jointly owned spaces.

Think of a condo as an apartment you own instead of rent. However, you only own your individual unit, and you own a percentage of common areas alongside other condo owners in your condominium association. Like traditional homeowner associations, condo associations are responsible for the maintenance and operation of shared areas of the building and shared outdoor spaces.

How condo mortgages work

Getting a condo mortgage may be more challenging than getting a single-family home mortgage for a number of reasons.

  • A lender needs to assess more than just the applicant. Michael Borodinsky, a manager of Caliber Home Loans’ branch in Bridgewater, New Jersey, points out that lenders need to assess not only the creditworthiness of the borrower but also the financial health and management of the condo association. "Condo mortgages may require more thorough reviews of the condo association's bylaws, financial statements and insurance coverage to ensure the property is financially stable and meets the lender's requirements," he said.
  • Future condo expenses may need to be considered. If a condo building requires unexpected repairs or major component replacements and its association hasn’t managed its funds well enough to pay for those repairs from its regular cash reserves alone, condo owners will need to shell out extra money above and beyond their usual monthly dues for what’s called a “special assessment.” In that case, condo buyers may be walking into a situation in which they’ll owe a lot of money in the future, and that can impact the mortgage process.
  • Additional requirements may be necessary if the project is under construction. In that case, lenders have to assess current sales and construction completion plans before approving the project and agreeing to provide mortgage financing. However, Borodinsky notes that builders of new condominium projects typically work with a preferred lender. This lender secures project approval in advance so buyers can proceed without jumping through as many hoops.

» MORE: What is a conventional mortgage?

Types of condo mortgages

When it comes to condo mortgages, you can use the same loan types as you can for a single-family property. For example, you can use conventional loans, FHA loans, VA loans, USDA loans and jumbo loans to purchase a condominium as long as the specific loan and property requirements are met.

Conventional condo loans require a down payment of at least 3%. A conforming conventional loan must meet guidelines from Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac have guidelines much like those set by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) for financing condos, albeit with some minor differences.

  • Only up to 15% of the units in a condo project can have condo association fees 60 days or more overdue.
  • At least 10% of the condo association’s funds must be reserved for maintenance.
If you need a loan with a low down payment requirement, you might opt for an FHA loan. This type of home loan 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.

To be approved for an FHA loan, your condominium must meet the following requirements:

  • The building or complex needs to have at least five units.
  • At least 50% of the condo units have to be owner-occupied.
  • Nonresidential space should not exceed more than 35% of the total floor area of the condo project.
VA loans help eligible military members, veterans and surviving spouses purchase a home without a down payment. VA loans also come with competitive interest rates, limited closing costs and no requirement for private mortgage insurance (PMI). 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 VA.

To qualify for the VA loan program, the condo development must meet the following criteria:

  • At least 75% of the units must be sold.
  • At least 50% of the units must be owner-occupied.
  • At least 75% of unit owners must be current on condo association dues.
  • No more than 10% of the units can be owned by a single entity.
Loans backed by the U.S. Department of Agriculture (USDA) allow eligible borrowers in qualified rural locations to 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. It's also worth noting that in order to qualify for USDA loans, your income cannot exceed 115% of the USDA’s median household income standard based on your condo’s location and your family size.

USDA loans have guidelines that are similar to those set by the FHA and VA, including:

  • The condo must have flood insurance if it’s located in a risky area.
  • The condo must be structurally sound.
Jumbo loans exceed the loan limit for conforming loans, which is $726,200 for most areas of the U.S. in 2023. These loans are typically used for high-value properties, like luxury condos, so their minimum credit score and down payment requirements are usually higher than for conventional loans.

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 you want 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 and any issues that arise.


The pros of a condo include:

  • Less maintenance: Condo owners are typically responsible only for the upkeep of their own unit’s interior. The maintenance of shared spaces is handled by the condo association.
  • Comparatively low price: Since condos don’t come with all of the freedoms offered by single-family homes, they are generally more affordable.
  • Community feeling: Not everyone wants a huge house with a lot of land. Condos allow you to live within an already-established community.
  • Appealing location: Condos are popular in cities and urban areas, so they’re often in convenient locations.


There are several downsides to condos:

  • Association fees: Condo owners must pay fees that are used to maintain the property. The convenience isn’t free.
  • More challenging to sell: Most Americans live in single-family, detached homes, so condos may not be a strong bet if you think you’ll sell in a few years.
  • More challenging to finance: Since there are outside factors at play in a condo, there may be more strict requirements to get a condo mortgage.
  • Less autonomy: You don’t get 100% of the say when you live in a condo. For common spaces and larger decisions, the condo board must make decisions together.

» MORE: Tax deductions for homeowners

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    Are interest rates higher on condos?

    According to Jay Dacey, president of Jay Dacey Mortgage Team in St. Paul, Minnesota, interest rates and closing costs for condos can be slightly higher than rates and closing costs for single-family homes because of the additional risks that condos present to mortgage bondholders. However, the difference in rates may be insignificant and can depend on a broad range of factors.

    How long is a condo mortgage?

    Like other types of home loans, condo mortgages typically last from 10 to 30 years. Ultimately, the length of a condo mortgage depends on what the borrower wants and can qualify for.

    Are condos cheaper than houses?

    According to the National Association of Realtors, the median existing condo price nationally was $337,300 in March 2023. This is lower than the median price of existing single-family homes that month, which was $380,000.

    Are condo fees included in your mortgage?

    According to the Consumer Financial Protection Bureau, condo fees typically aren’t wrapped into a mortgage payment. Instead, they’re paid directly to the condo association.

    What is a kiddie condo loan?

    A kiddie condo loan is a loan backed by the Federal Housing Administration that lets parents be co-signers on their child's mortgage, making them joint owners of the condo.

    Bottom line

    Condos can be a good investment for many, but they do come with stricter mortgage approval guidelines. They’re generally cheaper than single-family homes, though, so if a condo suits your needs and you meet a lender’s requirements for a condo mortgage, 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. If this is a deal-breaker for you, you can always consider other housing options, like single-family properties.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. National Association of Realtors, "Highlights From the Profile of Home Buyers and Sellers." Accessed April 19, 2023.
    2. U.S. Census Bureau, "Statistical Brief: Condominiums." Accessed April 19, 2023.
    3. Federal Emergency Management Agency, "Condominium Association." Accessed April 19, 2023.
    4. Nationwide, "What is a condo special assessment?" Accessed April 19, 2023.
    5. U.S. Department of Housing and Urban Development, "Let FHA Loans Help You." Accessed April 21, 2023.
    6. U.S. Department of Veterans Affairs, "VA Home Loans." Accessed April 21, 2023.
    7. USDA Rural Development, "Single Family Housing Guaranteed Loan Program." Accessed April 21, 2023.
    8. Consumer Financial Protection Bureau, "What is a jumbo loan?" Accessed April 21, 2023.
    9. National Association of Realtors, “Community and Transportation Preferences Frequencies.” Accessed May 11, 2023.
    10. National Association of Realtors, "FHA Condominium Rule Assessment." Accessed April 21, 2023.
    11. Fannie Mae, "Selling Guide." Accessed April 21, 2023.
    12. USDA Rural Development, "Chapter 5: Property Requirements." Accessed April 21, 2023.
    13. USDA Rural Development, "Environmental Requirements and Flood Insurance." Accessed April 21, 2023.
    14. Rocket Mortgage, "What To Know About Buying A Condo With A VA Loan." Accessed April 21, 2023.
    15. National Association of Realtors, "Existing-Home Sales Slid 2.4% in March." Accessed April 21, 2023.
    16. Consumer Financial Protection Bureau, "Are condo/co-op fees or homeowners’ association dues included in my monthly mortgage payment?" Accessed April 21, 2023.
    17. redT Homes, "Kiddie Condo Loans? What Are They?" Accessed April 21, 2023.
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