How Much of a Down-Payment Do I Need to Buy a Condo?

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If you are considering the purchase of a condominium, you may wonder how much of a down payment you need to get a mortgage. Depending upon the lender and other factors, you will probably need somewhere between 3% and 20% down to buy a condo, with 10% being the most common for people with condo loans from conventional lenders.

More and More Lenders Are Offering Condo Loans with Reasonable Rates and Down-Payment Requirements.

condo loans

Theoretically, the down payment for a condo should be the same as a single-family home. But one of the major differences with condos is that many developments across the US may not qualify for loans that are backed by FHA or VA. Other condo developments may not be approved for condominium loans that are backed by Fannie Mae or Freddie Mac.

This may limit your options for down payments. FHA loans are a great choice for many buyers with less to put down; you can often buy a home with only 3.5% down. If you qualify for a VA loan, you may not need a down payment at all. But if the condo development where you want to buy is not approved for VA or FHA financing, you will not be able to get a loan from those organizations.

Some parts of the US have fewer condominium developments that have been approved by FHA, VA and/or Freddie Mac and Fannie Mae. So, depending upon where you want to buy your condo, your options could be more limited.

You can look for condo developments that are approved by FHA by state and county. There could be some limited options in some states. For example, in Florida, there were only 130 condo developments approved for FHA financing in 2016. In Nevada, there were only 30 condo developments that were approved in that year, while only 145 were approved in Arizona. However, in California, there were more than 2,000 developments approved for FHA financing in 2016. The trend for condominium financing looks positive in 2017 and 2018 as well. Check the latest FHA requirements for loans in 2019.

If you cannot find a condo that has been approved for FHA and VA financing, you may have to get a conventional mortgage that is not backed by a government agency. In most cases, those lenders will want a higher down payment.

The reality is that many condominium complexes do not try to get FHA or VA certification because the documentation and regulatory process is very complex and time consuming.

But you also can search for condo developments in all states that have been approved for conventional financing that are backed by Fannie Mae and Freddie Mac. But do not be too surprised if you do not find that many in the area you are looking for. Some states may have no approved condo projects for this type of financing.

This does not mean it is impossible to get a conventional mortgage for your condo, though. Most condos that have not been approved yet often only need a limited review before you can get conventional financing. Essentially, your lender will send a form to the homeowner’s association for the condo development where you want to buy. If the condo meets government requirements, it can be approved for financing. The basic requirement is that fewer than 15% of unit owners can be behind on HOA dues and more than 50% of units must be occupied by the owner. But there is one catch to this. Buyers have to put down at least 10% of the purchase price to get the limited review.

If you do need to apply for a conventional condo-mortgage that is backed by Fannie or Freddie, does not mean that you must come up with 20% or more for a down payment. The amount that you will need for your down payment depends upon things such as your income and credit score, which you obviously have control over. We suggest educating yourself on the current down-payment requirements for Fannie Mae.

Also, lenders are influenced regarding down payment by how many units in the building are occupied by the owners compared to how many are being rented out. Lenders may ask for a higher down payment if you are buying a condo where there are more renters. The lender’s point of view is that a unit that is rented out is not maintained as well, so it is a higher risk to the entire condo project. Most condo lenders want to see buildings that are 80% or 90% owner occupied for you to get the lowest down payment and a competitive rate on a loan for a condo.

About Bryan Dornan

Bryan Dornan is a Financial Journalist and currently serves as Chief Editor of Bryan has worked in the mortgage industry for over 20 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. Bryan's continual focus is to promote affordable home-ownership to consumers like you across the United States. He also writes for RealtyTimes, Patch, Medium and other national publications. Find him on Twitter and Muckrack.