Condo loan requirements and tips for getting approved

Many buyers consider a condominium, or “condo,” instead of a single-family house because they’re often more affordable. When you apply for a condo loan, lenders review factors such as credit score, income, and the fiscal health and management of the homeowners association (HOA) that oversees the building. This is because a well-maintained HOA protects your unit's value, while a struggling one can lower it.

Below, you’ll learn all condo loan requirements, how to qualify, and practical ways to land the best deal.

What’s a condo?

A condo is a privately owned residence located within a larger complex that includes shared spaces and amenities. It’s similar to an apartment, but the key difference is that you actually own the property rather than renting it. However, a condo association, sometimes called a condo HOA, manages the building and takes care of things like:

— Maintenance and repairs for shared spaces

— Setting and enforcing rules like quiet hours and pet policies 

— Collecting monthly fees to cover insurance, reserve funds, and future renovations

As a condo owner, you can influence the association by voting for the board of directors and even running for a position yourself. While you don’t make day-to-day decisions alone, the HOA ensures the building is maintained and the community runs smoothly.

What are warrantable condos?

A warrantable condo is a unit or building that meets financial and operational standards set by government-sponsored lenders Fannie Mae and Freddie Mac, making it eligible for conventional mortgage financing. For Federal Housing Administration (FHA) and Veterans Affairs (VA) loans, a similar designation exists, called an “approved project.” 

Lenders view warrantable condos as less risky because the communities follow established rules that keep the buildings financially secure, structurally reliable, and mostly owner-occupied. To earn the “warrantable” label, a condo must pass several key assessments, including:

— Have at least 50% of units owner-occupied as primary residences.

— Limit ownership so no single owner holds more than 20% of the units.

— Ensure commercial space occupies no more than 35% of the building’s square footage.

— Maintain a financially stable HOA with at least 10% of the annual budget reserved.

— Ensure fewer than 15% of condo owners are over 60 days late on HOA fees.

— Avoid any active lawsuits against the HOA.

— Carry sufficient insurance for the building.

What are non-warrantable condos?

As you might expect, a condo is considered non-warrantable if it fails to meet the conditions for a warrantable condo. Lenders consider these properties riskier because financial, legal, and occupancy issues could threaten the building’s stability. This makes it harder for buyers to secure conventional loans for condos.

How to finance a condo: 6 key loan and government-backed options

Before exploring types of condos, it’s important to understand the loan options that make ownership possible. Here are six condo loan guidelines that help buyers secure financing. 

1. Conventional loans

A conventional loan comes from a private lender, such as a bank or credit union, and is not backed or sponsored by the government. To qualify, you’ll generally need a credit score of 620 or above, a debt-to-income (DTI) ratio below 43%, and a minimum down payment of 3%. Other borrower requirements include homeowners' insurance and proof of income to show you can reasonably afford the monthly payments.

2. FHA

(FHA) loans help low to moderate-income borrowers purchase a home. They’re especially popular with first-time buyers because they offer more flexibility with credit scores. You can qualify with a minimum score of 580 if you make a down payment of at least 3.5%. Borrowers with scores as little as 500 can still get an FHA loan, but they must put down at least 10%.

The FHA enforces eligibility criteria specific to condos. It requires the property to meet financial and operational standards, remain primarily residential, and include at least two dwelling units. You can check if a condo meets these requirements on the Department of Housing and Urban Development’s FHA-approved condominium page.

3. VA

VA loans are for active military service members, eligible military spouses, and veterans. Because they’re government-backed, they tend to come with lower interest rates and greater flexibility with credit scores. Most lenders want a credit score of 620 or higher, but like FHA loans, you may qualify with a score as low as 500 if you can make a down payment of 10% or more.

Some lenders, including Better, offer zero-down mortgages to eligible veterans.

4. USDA

Like FHA loans, United States Department of Agriculture (USDA) loans help low to moderate-income borrowers and have flexible credit requirements. A score under 620 can make it harder to get a loan, but strong savings, a steady income, and a larger down payment can offset a lower score. The twist is that applicants must reside in an approved rural area. You can check a property’s eligibility using the USDA’s property map.

5. Fannie Mae

Fannie Mae, short for the Federal National Mortgage Association, is an enterprise that makes mortgages more accessible through programs like HomeReady. To qualify, your wages cannot exceed 80% of your area’s median income (AMI), which you can check using Fannie Mae’s income lookup tool. Borrowers must also complete a homebuyer education course.

6. Freddie Mac

The Federal Home Loan Mortgage Corporation, or Freddie Mac, is an organization that helps expand access to mortgages. Its Home Possible loans mirror HomeReady, limiting income to 80% of AMI and allowing financing up to 97% of a home’s value. Buyers can also access Affordable Seconds, a second mortgage that covers expenses like closing costs and prepaid taxes. Nonprofits and local programs often provide funding for these loans.

What’s a condo loan, and how is it different from a regular mortgage?

Getting a condo mortgage loan is comparable to getting any other kind of home loan. Lenders will review your credit profile to decide whether to approve your application and set terms like your interest rate and down payment. You’ll also need homeowners' insurance to protect your unit. Assuming the condo is warrantable, you can apply for standard financing options, including conventional and FHA loans.

One key difference in condominium financing is that lenders evaluate not only your credit and the unit itself but also the building’s condition and management. They’ll look at factors like structural integrity, occupancy rate, and the HOA’s financial health, including budgeting practices and reserve funds. Because of this extra due diligence, mortgage rates can be slightly higher for condos than for other types of residential real estate.

...in as little as 3 minutes – no credit impact

Considerations when taking out a condo loan

Here are a couple of factors to keep in mind when applying for a condominium mortgage:

Stricter underwriting review: Securing a loan for a condo can take a little longer than other types of homes because the lender evaluates both you and the condo project.

— Potentially higher interest rates: Because condos are a shared property arrangement and dependent on an HOA, your offers may have slightly higher interest rates.

Top tips for securing a condo mortgage with great terms

Getting a condo mortgage may feel complex, but understanding the process and preparing in advance makes a big difference. These strategies help streamline your application and improve your chances of success:

— Factor in closing costs: Closing costs usually range from 3–5% of the loan amount. These fees cover services like appraisals, title insurance, and lender charges, so plan finances accordingly. 

— Check the HOA’s finances: Review the HOA’s budget, reserve funds, and recent financial statements. A well-managed HOA helps condo owners avoid unexpected costs for major repairs and keeps the building properly maintained.

— Do your due diligence: Don’t automatically accept the first offer you get. Lenders set different requirements and terms, and even a small difference in interest rates, fees, and loan conditions can save (or cost) you thousands over the life of your mortgage. Compare your options with platforms like Better so you can review offers and find the best deal.

...in as little as 3 minutes – no credit impact

Finance your dream condo without the headaches

With its shared ownership model and reliance on an HOA, getting a loan can be slightly more complex than for other homes. But it doesn’t have to be difficult.

When you choose Better, you get a streamlined application process that’s fully online and takes as little as three minutes to complete. Once approved, funds could be in your account in about seven days. And if you have questions and concerns at any point in the process, our support team is standing by day and night to help.

See how much condo you can afford, and score a great interest rate today.

...in as little as 3 minutes – no credit impact

FAQ

What are the pros and cons of buying a condo vs. a house?

Advantages of a condo over a single-family home include a potentially lower purchase price, less maintenance, and simpler insurance since the HOA manages the building itself. You may also have access to amenities like a pool and gym. Potential drawbacks include monthly HOA fees, less privacy, and a slightly more complex mortgage experience.

What are the requirements for conventional loans on a condo?

The basic requirements for securing a conventional loan include:

— A credit score of 620 or higher

— A debt-to-income (DTI) ratio lower than 43%

— A down payment of at least 3%

What are the options for financing condos?

Here are several choices for financing a condo:

— Conventional loans let buyers finance warrantable condos with standard mortgage terms.

— FHA loans provide government-backed financing with easier credit requirements.

— VA loans offer eligible veterans and active service members mortgages with low or no down payment.

— Fannie Mae and Freddie Mac programs help low- to moderate-income buyers access loans like HomeReady or Home Possible.

— Second mortgages and local assistance programs cover expenses such as down payments or closing costs.