Conventional Condo Loans

Financing the purchase of a condo can sometimes be difficult, as most lenders consider condos to be a higher risk than single-family homes. This is because condo ownerships rely partially on the other owners in the building. Although the underwriting process is more strict with condo loans, conventional condo loans offer the best rates for mortgages on condos. 

Conventional condo loans come with a lot of rules for requirements, so read carefully!

The project cannot be subject to additional phasing or annexation.

At least 51% of the total units in the project must be conveyed to purchasers as principal residencies or second homes. *This requirement does not apply when lenders deliver mortgage loans secured by principal residencies or second homes*

Lenders must review the homeowners' association actual budget to determine the budget is:

  • adequate (i.e., it includes allocations for line items pertinent to the type of condo),
  • provides for the funding of replacement reserves for capital expenditures and deferred maintenance equal to at least 10% of the budget,
  • provides adequate funding for insurance deductible amounts.

No more than 15% of the total units in an attached condo project can be 30 days or more past due on the payment of their condo/association fee payments.

All facilities related to the project must be owned by the unit owners or the homeowners' association. The developer may not retain any ownership interest in any of the facilities related to the project.

The amenities and facilities (including parking and recreational facilities) cannot be subject to a lease between the unit owners or the homeowners' association and another party.

Separate metering of individual units is recommended but not generally required. For projects in which the units are not separately metered, the lender must:

  • Determine that having multiple units on a single meter is common and customary in the local market where the project is located
  • Confirm that the project budget includes adequate funding for utility payments.

Unit owners in the project must have the sole ownership interest interest in, and rights to the use of the project's facilities, common elements, and limited common elements.

At least 90% of the total units in the project must have been conveyed to the unit purchasers.

Control of the homeowners' association must have been turned over to the unit purchasers.

No single entity; the same individual, investor group, partnership, or corporation may own more than 10% of the total units in this project. In the case of a project that has fewer than ten units, no single entity may own more than one unit. 

The project must be covered by the following types of insurance, all of which are required by Fannie Mae for a condo project:

  • hazard insurance
  • flood insurance
  • liability insurance
  • fidelity insurance

The project must be demonstrably well managed.

If the project is professionally managed: the management contract should be for a reasonable term, and the management contract's termination provision must not require a penalty payment or advance notice of more than 90 days.

The project must be located on one contiguous parcel of land. Note: The project may be divided by a public street.

The structures within the project must be within a reasonable distance from each other.

Common elements and facilities - such as recreational facilities and parking - must be consistent with the nature of the project.

Contact me to get qualified for this condo program: 512-775-6820 or