Buying a condo can be a great way to own property without the upkeep of a single-family home, but securing a mortgage for a condo comes with unique considerations. Lenders often have stricter requirements due to factors like shared ownership of common areas and homeowners association (HOA) rules.

Whether you’re purchasing a condo as a primary residence, an investment, or for vacation rentals, understanding how condo financing works can help you navigate the process.

What Is a Condo?

A condominium, or condo, is a type of property where individuals own their specific unit but share ownership of common spaces like hallways, pools, and recreational areas. Unlike standalone houses, condos are often part of a homeowners association (HOA), which manages maintenance, fees, and community rules. Some buyers purchase condos as primary residences, while others use them as investment properties or vacation rentals.

Condos vs Apartments

The key difference between condos and apartments is ownership. Apartments are rented, while condos are individually owned. Condo owners are responsible for their mortgage, HOA fees, and maintenance inside their unit, while apartment renters simply pay rent to a landlord. Additionally, condos often come with more customization options and potential investment benefits compared to apartments.

While you may hear about people purchasing an apartment, this typically refers to people buying into cooperative housing (a co-op). In this case, a buyer doesn’t purchase the apartment itself, but rather buys shares of a corporation that owns the building. That corporation, in turn, is collectively owned by the tenants of the building and all members share the expenses associated with the building.

Those interested in buying into a co-op might explore apartment mortgages to find alternative financing options that accommodate this type of property.

Condos vs Houses

Compared to houses, condos require less maintenance since exterior upkeep and common areas are typically managed by the HOA. However, condos may come with HOA fees and restrictions that homeowners wouldn’t face. While houses generally appreciate in value more predictably, condos can still be a smart investment, especially in high-demand areas.

Pros and Cons

How Does Condo Financing Work?

Financing a condo differs from financing a traditional home because lenders evaluate both the borrower and the property itself. In addition to checking your credit score, income, and debt-to-income ratio, lenders also assess the financial health of the condo association. Key factors they consider include:

  • HOA financial stability: Lenders review the HOA’s budget, reserves, and outstanding debts.
  • Owner-occupancy ratio: Many lenders require a certain percentage of units to be owner-occupied rather than rented out.
  • Litigation status: If the condo development is involved in lawsuits, it can impact loan approval.
  • Property insurance coverage: The condo must have adequate insurance to protect common areas and shared spaces.

Because of these additional factors, condo mortgage rates may be slightly higher than those for single-family homes. Borrowers should also be aware of loan restrictions, as some lenders won’t finance condos that don’t meet Fannie Mae or FHA approval guidelines.

Condo Loan Options

Financing a condo requires choosing the right loan program based on your financial situation and the property’s eligibility. While conventional loans are common, government-backed options like VA, FHA, and USDA loans offer flexible terms for eligible buyers. Additionally, non-QM loans provide solutions for those who don’t meet traditional lending criteria. Below, we’ll explore different condo loan options and their requirements.

Conventional Loans

Conventional loans are a popular choice for condo buyers who meet standard lending requirements. These loans typically require a credit score of 620 or higher, a down payment of at least 3%–5%, and a debt-to-income (DTI) ratio below 45%.

However, lenders also evaluate the condo development itself, ensuring it meets Fannie Mae or Freddie Mac guidelines. Condos that meet Fannie Mae or Freddie Mac guidelines are considered warrantable, while those that don’t are considered non-warrantable.

To be considered warrantable, a condo community must meet requirements such as not being part of a timeshare, meeting a minimum owner-occupancy rate, and contributing a certain amount of its annual budget to its reserve account. It’s important to note that non-warrantable condos will typically not be eligible for conventional loans or government-backed mortgage programs such as VA loans, FHA loans, or USDA loans.

warrantable and non-warrantable condo

VA Loans

VA loans offer zero-down financing and competitive interest rates for eligible veterans, active-duty service members, and surviving spouses. To qualify, the condo must be on the VA approved condos list, which ensures the development meets the Department of Veterans Affairs’ requirements for financial stability and occupancy. If a condo isn’t VA-approved, buyers may request approval, but the process can take time.

FHA Loans

FHA loans provide a more accessible path to homeownership with low down payment options (as low as 3.5%) and flexible credit requirements. However, like VA loans, the condo must be on the FHA-approved condo list or meet specific eligibility criteria. FHA loans are a great option for first-time homebuyers or those with lower credit scores looking for an affordable way to purchase a condo.

USDA Loans

For those buying in eligible rural areas, USDA loans offer zero-down financing and low interest rates. While condos can qualify for USDA loans, they must be located in an approved rural zone and meet strict property guidelines. This loan type is ideal for buyers looking for affordable homeownership options outside of major metropolitan areas.

Keep in mind that you might be surprised at some of the areas that are eligible for USDA loans. While you won’t be able to use a USDA loan to finance a condo in the heart of a major city, you can often find eligible condos in suburbs and within commuting distance of large metropolitan areas.

Non-QM Loans

Non-QM (non-qualified mortgage) loans are designed for buyers who don’t meet traditional lending requirements, such as self-employed individuals or those with non-traditional income sources. These loans offer alternative income verification methods, higher loan amounts, and flexible credit score requirements. Non-QM loans can also be an option for financing non-warrantable condos, which don’t meet conventional loan guidelines.

Popular non-QM condo financing options include:

A view of buildings near the water on a sunny day as seen from the balcony of a condo. 

Discover Flexible Condo Financing Options

Securing a condo loan comes with unique challenges, but the right financing options can make all the difference. Whether you’re considering a conventional loan, a VA or FHA-backed mortgage, or a non-QM loan, Griffin Funding is here to help you find the best solution. Our team understands the complexities of condo financing and can guide you through condo loan requirements, HOA approvals, and loan eligibility with ease.

And when it comes to managing your mortgage, the Griffin Gold app gives you an edge—offering real-time loan updates, payment tracking, and financial tools right at your fingertips. Explore your condo financing options today with Griffin Funding and take the first step toward owning your ideal home.

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Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 23 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 11 years in business.