Purchase Tips · June 28, 2025
Condo Mortgages: What Is Different and What to Watch For
Condo financing is more complex than single-family — lenders evaluate the entire building not just you. Here is what can disqualify a condo and how to navigate the process.
When you buy a condo, lenders evaluate the entire condo project — not just your creditworthiness.
Why Condos Are More Complex
You own your unit plus a share of common elements. Lenders care about HOA financial health because if the association fails, all unit values decline.
What Lenders Evaluate
Project Approval: Conventional loans require projects to be Fannie/Freddie approved (warrantable). Fannie Mae maintains an approved project database.
Owner-Occupancy Rate: Fannie/Freddie require 50%+ of units to be owner-occupied. Heavy investor concentration raises lender risk.
HOA Finances: Budget, reserve study, and meeting minutes reviewed. Red flags: reserves below 10% of annual budget, deferred maintenance, pending special assessments.
Litigation: Active lawsuits — especially construction defect suits — cause most conventional lenders to decline the project.
Non-Warrantable Condos
Projects with high commercial space, one investor owning 10%+ of units, hotel-style short-term rentals, or new construction less than 90% sold are non-warrantable. These can still be financed through portfolio lenders at higher rates and with larger down payment requirements.
HMS works with multiple lenders specializing in condo financing. Call 309-222-8286.