Conventional Mortgage Condo Requirements | Condo Options
Living in a condo sounds like homeownership with convenience with low maintenance, but the list of requirements to obtain financing can be difficult to navigate through. Looking for conventional mortgage condo requirements? This article will go over conventional requirements for condos:
- Fannie Mae condo requirements.
- Freddie Mac condo requirements.
- And condos that do not meet Fannie Mae and Freddie Mac requirements.
Understanding guidelines for condos will prevent delays.
Fannie Mae Condo Requirements
Fannie Mae has eligibility requirements when it comes to condos, co-op, and planned unit developments (PUD). When determining a project eligibility risk, factors for risks are distinct when determining if the project meets the requirements.
During the mortgage process, a condominium project questionnaire is completed by the homeowners association or management company to streamline the process. This is not a borrower’s duty to determine if a project meets Fannie Mae’s eligibility requirements but should be considered to prevent any unforeseen circumstances.
Asking the homeowners association or realtor if other people are buying units in the building with traditional conventional financing should be the first step. It is possible for someone to obtain financing, and the project still be ineligible after due to guidelines changing or the current state of the complex.
Minimum Down Payment
The minimum down payment on a condo is 3% for primary residences and grants are available to borrowers who qualify. The minimum down payment for a second home is 10% and 15% for an investment property.
Freddie Mac Condo Requirements
Freddie Mac has condominium requirements similar to Fannie Mae. The minimum down payment is 3% made available through the HomeOne and Home Possible program with grants available.
When choosing an option and determining condominium requirements, a borrower can ask either if Fannie Mae or Freddie Mac has favorable terms. In some cases either both, one or the other, or neither will offer an appraisal waiver– it is best to check both options.
Eligibility for Condos
In order to get pre-approved for a condo, a borrower should reach out to a Loan Originator and ask for a list of documents required. The Loan Originator will review all documents and run the Automated Underwriting System to determine eligibility. The Automated Underwriting System is run during the pre-approval process that analyzes credit, capacity, and collateral.
In some cases, a Loan Originator can be mistaken when it comes to condo financing. A loan can get denied because of a mortgage company not being able finance condos outside Fannie Mae condo requirements and Freddie Mac condo requirements.
Ineligible Projects
There are a lot of ways that a project could be ineligible for financing. Three steps to help prevent denial due to a project being ineligible:
- Ask the association what type of financing has gone through in the past.
- Ask your lender to help with the process of filling out a condominium project questionnaire.
- Have them review necessary condominium project documents.
Not all lenders are willing to do the work prior to taking a loan application, but some will be happy to review them.
Or you can find examples of ineligible projects:
- Fannie Mae’s list of ineligible projects.
- Freddie Mac’s guidelines condominium for projects.
For properties that are ineligible there are still other options for financing.
Other Types of Financing for Condos
FHA condo financing:
- Project must be FHA-approved.
- 3.5% minimum down payment with grants available.
Condotel and non-warrantable condo financing:
- Financed through wholesale portfolio lending.
- Not all lenders are willing to finance these types of properties.
