Condos are a very popular housing choice offering many benefits. People often choose to purchase condos because they require less hands-on maintenance and are often less expensive than a comparable detached single family properties. For these same reasons, many absentee owners choose condominiums for their vacation homes and investors use them as rental properties.

Condo loans can be a bit tricky. Many lenders follow Fannie Maes and Freddie Macs underwriting guidelines and both have unique sets of underwriting criteria specific to purchasing and refinancing condos. FHA loans also have requirements which vary from Fannie and Freddie. Due to all of these variables, borrowers should seek out mortgage professionals who have significant experience originating these types of transactions. A seasoned professional will know what questions to ask to make sure that you dont encounter issues right before heading to the closing table.

What You Should Ask the HOA (Homeowners Association) To Help Your Condo Mortgage Approval

• Total number of units in the project
• How many of the units are sold or pending
• The number of units that are or will be owner occupied
• Please be sure to provide your mortgage professional with the contact information for the HOA

Considering buying or refinancing a condominium? Here you can find information on some of the questions to ask and steps to take to make sure you have a smooth transaction.

Are Mortgage Rates Higher for Condo Loans?

Typically, condo loans carry higher interest rates.  This is because condos are part of a larger multi-unit building, as opposed to a single-family house. This means that each individual unit will affect the value of the whole building. So if several owners are unable to pay their mortgages or some go into foreclosure, other units will inevitably lose some if their value. It seems unfair, but it’s just one of those things that comes with condominium ownership.

In addition, condos carry higher rates because they inherently carry higher risk. Home ownership associations (HOAs) will often anticipate some financial loss (not getting all owners’ dues on time) which puts the entire building at risk. Then you have investment properties to take into account, which also present a certain amount of risk to the entire building.

So how much higher are condo mortgage rates as opposed to loans for single family homes? It’s hard to pinpoint an exact percentage but roughly speaking, you could expect to see about a .25%-.5% higher rate on a condo loan. Underwriting guidelines for condo can be an added hurdle was they can be more restrictive than what applies to stand-alone stick built properties.

You can check current mortgage rates online in our rate tables. There youll find rate and closing cost information from some of the Nations leading mortgage lenders, brokers, banks, and credit unions. Please note that the rate data is for single family homes (not condos). Youl need to reach out to the various companies for more information on their current pricing.

Types of Financing for Condominiums

• Fixed & adjustable rate programs
• Purchase and condo refinance options
• Flexible terms for those with less than perfect credit
• 96.5-100% condo financing loans (FHA, VA, USDA) Ask lender or broker for options
• Condo mortgages for owner and non-owner occupied properties
• Properties can typically be held as primary residences, second homes, and investment properties

Tracking Down Freddie Mac Condo Guidelines and Why You Need to Know What to Ask

Condominium financing can be tricky business and not as vanilla as stand-alone, stick built construction. If you are planning on buying a condo, we highly recommend that you spend some time reviewing Freddie Mac and Fannie Mae condo underwriting guidelines to make sure that you have your bases covered. Every day home buyers find out days prior to closing that their condo association does not have adequate insurance coverage or some other issue which prevents financing from moving forward. It is imperative to speak with your real estate agents and mortgage professional at the START of the condominium buying process to see if there are any red flags.

Some real estate agents will recommend that you work with their preferred mortgage professional or a developer may recommend a local lending institution who will portfolio the loan and thus the mortgage may not be subjected to Freddie Mac condominium underwriting criteria. Just keep in mind that there may be no guarantee that the portfolio lender will continue to lend on the development down the road leaving you with a property which will be harder to sell since future buyers may have to jump through multiple hoops to obtain financing.

Where can I get a detailed list to go over with my real estate professional, the HOA representative, and my mortgage professional?

Freddie Mac has a list of condominium underwriting topics and the corresponding requirements on their web site. We cannot stress enough, from our past years in the business, it is in a buyers best interest to verify eligibility requirements BEFORE moving forward.

As youll see by viewing the pdf on Freddies web site, the list of criteria is not short and likely confusing for most consumers who are unfamiliar with mortgage and real estate related vocabulary. Make sure that your real estate and mortgage team have knowledge of guidelines so that they can guide you to an adequate solution.