Why is condo financing so hard

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Learn More. Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide. In many ways, financing a condo is the same as financing any other residential property.

The same lenders that make loans on other residential properties typically finance condos as well. Things like down payment requirements and other qualification standards are largely the same. However, there are a few key differences you should know before you start shopping. Here's a guide to financing a condo that should be useful whether you plan to buy a condo as an investment or as a full-time residence.

First, it's worth discussing the three types of mortgages that you could get for a condo. These three types apply to all residential real estate financing:. Before we go into the specifics of condo financing, one key point is that there are two ways you'll need to qualify for a mortgage on a condo:.

We'll get into the condo qualification concerns in the next section. The good news is that lenders generally require the same personal qualifications for a mortgage on a condo as they do for a single-family home loan. In a nutshell, there's nothing special required from you to finance a condo. They might have better security. Some condo associations hire security guards to patrol the grounds, which can mean a safer neighborhood. Condo fees can range from a couple hundred dollars to more than a thousand dollars per month, but these vary with each association and might increase over time.

These fees might pay for things like insurance, parking lots, security, and shared amenities. Before buying a condo, consider whether your budget can handle this extra expense. Each condo association sets its own covenants and restrictions, which are rules that members have to follow. These can range from simply annoying to outright restrictive, and breaking the rules might result in a hefty fine.

They might be harder to sell. Credible makes getting a mortgage easy Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit. We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed. A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates.

Talk to a loan officer only if you want to. Find Rates Now Trustpilot. A real estate attorney can help you decipher these documents. There are also some budget rules the association must abide by for potential residents to get a mortgage. Typically, an association is limited in terms of how much of its budget can be received from non-incidental business operations like a restaurant, health club or spa. They also must have enough money in the budget to cover the replacement and maintenance of things the entire community uses.

Maybe the clubhouse roof needs to be reshingled or the community pool needs resurfacing. Fidelity insurance covers the association in case someone is found to be embezzling or otherwise inappropriately using association funds.

Mortgage investors also limit how many homeowners within an association can be delinquent on their association dues. Typically, lawsuits that involve financial disputes are less concerning.

But a lender might deny a loan if there are court actions dealing with the structural soundness or safety of the complex. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. This content is powered by HomeInsurance. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions such as approval for coverage, premiums, commissions and fees and policy obligations are the sole responsibility of the underwriting insurer.

The information on this site does not modify any insurance policy terms in any way. Financing the purchase of a condominium home is somewhat different than the process of buying a single-family home.

For one, a condo mortgage usually comes with higher interest rates , and it can also be more difficult to qualify for thanks to additional underwriting. Condo financing is generally similar to financing a single-family home. In fact, the same type of loans available to single-family homebuyers are available to condo buyers, including:.

The major differences are that mortgages for condos often involve extra steps and additional paperwork, as well as come with slightly higher interest rates. Your lender must obtain additional documents from either the condo association, HOA or management company, as well. These can include:. To do that, the condo project itself must be vetted and meet lender standards. Plus, the condo must maintain insurance coverage standards and not be a party to litigation that could result in financial loss to the condo association.

You can search for FHA-approved condos through the U. The qualifications for an FHA loan include:.