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Condo Loans

We specialize in condo financing.

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Refinance Purchase

Condo Program

RK Mortgage Group is a leader in condo financing. We offer very exclusive product options for condos, whether they meet Fannie Mae’s guidelines or not. We can get you into a qualified condo with as little as 3% down. Benefit from our experience in getting you the best Condo financing at a lower rate.

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Are you struggling to get approved for a condo mortgage to buy or refinance your condominium? In recent years, it has been extremely difficult to get approved for a conventional mortgage to purchase a condo. The good news is that lenders are loosening their requirements when it comes to condominium loans that meet certain guidelines. Here are several tips to help you get on the right track to buying your dream condo.

How do Condo Loans Work?

There are as many options for financing a condominium purchase as there are for single family homes, the difference is the rules lenders must follow for “traditional” mortgage loans. 

Condo loans are harder to get than a mortgage for a single-family home because there is more risk for the lender due to the type of property you’re buying. Condominiums come in developments and have associations that make them riskier for lenders. This higher risk translates to higher mortgage rates and potentially a higher down payment for you.

Fannie Mae and Freddie Mac both have guidelines lenders must meet for condominium loans just like single family homes. If the condo you’re purchasing doesn’t meet the guidelines set by Fannie/Freddie you won’t be eligible for traditional financing.

You still must meet income and credit requirements to qualify for condo home loans; however, the lender will also want to ensure that the development is financially stable and free from lawsuits. 

Does My Condominium Qualify for Financing?

When you purchase a condominium, you share an interest and risks in the condo and the development with the other owners as well as the homeowners’ association. The association is responsible for maintaining the development both legally and financially. Homeowners associations that neglect their finances or have lawsuits pending against them could be the basis for not getting investment condominium loans approved.

Fannie Mae, Freddie Mac, the FHA and VA all have guidelines for condominium developments that their homeowners’ associations must maintain in order have mortgage loans approved for their units. One of the most important requirements is that at least fifty percent of the units be owner occupied and that no single person or entity owns more than ten percent of the units. If your development was built more recently there may slightly different guidelines. 

Condominium homeowners’ associations are required to maintain ten percent of their annual income in reserve for maintaining the development. Some lenders will require a financial review of the unit for the last year. 

If your condominium does not pass these agency reviews you can still get approved for a loan, you may just have to seek non-traditional financing from a portfolio lender. These lenders don’t sell their loans on the secondary market but keep them in their own portfolios. 

Portfolio lenders often charge higher interest rates and buyers that need condo loans with 5 down may have fewer if any options from this type of lender. If your condominium is not warrantable for traditional financing you can reasonably expect to have a down payment of 20-30 percent.

How Long Are Condo Loans?

If you are considering condo ownership as your primary residence or as an investment owning your condo is a long-term investment. When financing your purchase, you typically have a choice between 15 or 30-year loan term lengths. 

Choosing a 30-year mortgage when purchasing your condominium gives you fixed payment each month that could be easier on your budget. If you opt for 15-year mortgage you can expect a higher payment but will build equity in your condo faster than you would with a 30-year mortgage loan.

If you want to make your condominium loan more budget friendly you could choose an interest only or adjustable interest rate loan. Adjustable rate mortgage loans offer a discounted payment period that lasts from one to five years depending on the type of loan you choose. Interest only mortgage loans have the same initial low payment because you’re not repaying loan principal during the interest only period. 

Getting the lowest payment in the beginning of your condo loan repayment can come in handy when you factor in the expense of your condo association dues. Your mortgage lender will qualify you based on your total payment including taxes, insurance and dues. 

It Is Becoming Easier to Get Approved

As long as the condo you’re wanting to purchase meets the guidelines set out by Fannie May and Freddie Mac you should not have problems qualifying for a mortgage. Following the foreclosure crisis, it was extremely difficult to get a condo loan approved; however, times are changing and lenders are relaxing their restrictions. 

If you’re just getting started exploring condo home loans, call your association office and ask questions about the development. Doing your homework will help alleviate much of the frustration people encounter when buying their first condominium.

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