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Condo Mortgages

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Condo Financing

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 5% down. Benefit from our experience in getting you the best condo financing at a lower rate.

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We offer one of the industries lowest rates.

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Is your broker telling you that you can get a mortgage on a condo but the rates are going to be higher than interest rates on single family homes? The mortgage rate for condominiums varies depending on how much cash you are putting down at closing. Here are several helpful tips to help you get a better condo mortgage rate for your next purchase or even when refinancing your existing condominium.

Why Are Condo Mortgage Rates Higher?

Mortgage rates for condominiums are technically not more than those for single family homes; however, there is an added cost depending on how much equity you have. If you have less than 25 percent equity you will find there is an added interest rate cost for condominium mortgage rates.

If you call around shopping for a lower rate most brokers will tell you that condominium rates are just higher, take it or leave it. If you’re getting a Fannie Mae condominium mortgage loan you’ll take a hit of .75 percent for any mortgage loan over 75 percent loan to value (LTV). If you are putting less than 25 percent cash down on your home purchase you can expect to pay a higher mortgage interest rate.

How to Calculate Condominium Mortgage Costs

Suppose your loan amount is $250,000. The Fannie Mae add on is going to cost you $1,875.00. ($250,000 x .750% equals $1,8750) You have the option of paying that amount in cash at closing to avoid the increase in your interest rate. If you don’t pay this amount you can expect the mortgage rate to be higher by .25 percent.

This add on makes your condominium mortgage more expensive, not necessarily giving it a higher interest rate depending on how your mortgage broker structures the loan. 

Qualifying for a Condominium Mortgage Loan

As it is with any home mortgage loan, getting a loan for your condo purchase requires sufficient credit and steady income from employment or other sources. You will also be required to make a down payment in most cases which ranges from 5 to 30 percent depending on the type of loan you are getting.

Condominium mortgage loans typically have more stringent loan to value (LTV) requirements than single family homes. Loan to value is the ratio of how much your condominium is worth compared to how much you owe. If you make a 25% down payment, your loan to value ratio would be 75 percent.

Your Condo Homeowner Association Matters

One of the biggest obstacles to getting a mortgage for condo investment is finding an approved condo development. This is especially true for getting a Miami condo mortgage.

What makes condo home loans so difficult for many borrowers is that in addition to qualifying based on your income and credit history, the condo homeowner association must qualify to get your loan approved. Mortgage lenders are required to follow condominium guidelines set by Fannie Mae, Freddie Mac and the FHA before they can approve your condo for a mortgage loan.

Here are the basic guidelines that your condo development must meet for your unit to be approved:

  • At least 50 percent of the units must be occupied by owners.
  • No single owner or entity can own more than ten percent of units.
  • Association dues cannot be delinquent by more than 15 percent.
  • Borrowers with less than 25 percent down must pay .75 percent of the loan at closing or accept a mortgage rate that is .25 percent higher.
  • All association construction must be completed if the development is more than one year old.

Mortgage lenders will examine the associations finances and will deny mortgage application for units where the associations financials are questionable or there are lawsuits pending.

How Long Is a Condominium Mortgage?

Term length is the amount of time you have to repay your condominium mortgage loan. Your choices for term lengths when it comes to condos are typically 15 or 30 years. 

If your goal is to have the lowest payment possible choose a 30-year term length for your condominium mortgages. If your goal is to build equity quickly choosing a 15-year mortgage will result in a higher monthly payment; however, you will build ownership in your condo at a much faster rate than a 30-year mortgage.

As is the case with single family homes, you will have the option of choosing a fixed or adjustable interest rate. You can even choose an interest-only loan if you need the lowest possible payment for the interest only period of your repayment. 

Buying your first condo can be a very frustrating experience for the uninitiated because loan approval is not solely dependent on your credit history and income. Your realtor, mortgage broker and a good homeowners’ association all have resources available to help streamline the buying process. 

As with any home purchase, doing your homework on the development, home owners association, mortgage rates and fees can save you thousands of dollars and hours of frustration on your next condo purchase. 

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