Condo Loans 101: What Homebuyers Need to Know Before Financing a Condo

If you’re exploring the idea of buying a condo, you’re not alone. Condominiums can offer a cost-effective, lower maintenance and community-oriented lifestyle, especially for first-time buyers or those looking to downsize. But when it comes to financing your condo purchase, the process can look a bit different than buying a traditional single-family home. Understanding your condo loan options is a crucial first step toward making a confident, informed decision. 

Whether you’re in the early stages of researching or already browsing listings, this guide will help clarify your mortgage options, explain what makes condo financing unique and ultimately, empower you to choose a loan that fits your financial situation and homeownership goals.

Why Condo Financing Is Different

Condos are structured differently from single-family homes, which impacts how lenders assess risk and determine loan eligibility. When you buy a condo, you’re purchasing a unit within a larger building or community. That means you own the space inside your walls, while common areas, like the lobby, gym, or pool, are jointly owned with other residents through a homeowners association (HOA). 

Because of this shared ownership, lenders look at both your financial qualifications and the financial health of the condo project itself. Factors like the HOA’s budget, insurance coverage, owner-occupancy rates, and pending litigation can influence whether a lender will approve your loan.

What Types of Condo Loans Are Available?

There’s no one-size-fits-all loan for condo buyers. The option that works for you depends on factors like your credit score, down payment ability, income and long-term plans. Here are some of the most common types of mortgage loans used to finance a condo:

1. Conventional Loans

Conventional loans are the most popular financing option for condo buyers, especially those with solid credit and a decent down payment. These loans are not backed by the government but are typically offered by banks, credit unions and mortgage lenders. 

However, not all condo communities are eligible for conventional financing. The unit and condo project must meet certain guidelines set by Fannie Mae or Freddie Mac, including: 

• No more than 15% of units can be behind on HOA dues. 

• Adequate reserves and insurance coverage must be in place. 

If the condo project is on the approved list, getting a conventional loan is generally straightforward. If not, it can be more challenging, but not impossible.

2. Federal Housing Administration (FHA) Loans

FHA loans are backed by the Federal Housing Administration and are ideal for first-time buyers or those with lower credit scores and smaller down payments (as low as 3.5%). However, the FHA has its own list of approved condo developments, and the project must be on this list for you to qualify. 

The good news? As of recent rule changes, it’s now possible to get an FHA loan for a single unit in a condo project, even if the entire project isn’t approved, provided the unit meets specific criteria. This is known as a Single-Unit Approval, and it can be a helpful option if you’ve found your dream condo in an otherwise unapproved community.

3. Veterans Affairs (VA) Loans

If you’re a qualifying veteran, active-duty service member or surviving spouse, a VA loan can be an excellent way to finance a condo. VA loans have a variety of features like 0% down payment, no private mortgage insurance (PMI) and competitive interest rates. 

Similar to FHA loans, the condo project must be approved by the Department of Veterans Affairs. You can check the VA-approved condo list or work with a lender experienced in VA loans who can help with the approval process.

4. Jumbo Loans

If the condo you’re eyeing is in a high-cost area or exceeds conforming loan limits (typically $806,500 for 2025 in most areas), you might need a jumbo loan. These loans are designed for larger loan amounts and usually require excellent credit, a strong financial profile and a higher down payment. 

Jumbo loans come with stricter requirements, but they can open the door to luxury condos or prime city locations where prices are significantly higher. 

What to Look for in a Condo-Friendly Lender

One of the biggest sources of stress for condo buyers is working with a lender who’s unfamiliar with the nuances of condo loans. Not all mortgage lenders have experience navigating the additional documentation, project reviews and approval hurdles involved in condo financing. 

Here’s what to look for in a trusted lending partner: 

• Experience with condo loans – Ask how many condo loans the lender processes annually and whether they’ve worked with similar projects. 

• Familiarity with approval lists – A good lender can help you determine whether your condo is on the FHA, VA or Fannie Mae/Freddie Mac approval lists or assist with the approval process if it’s not. 

• Transparent communication – You want a partner who explains the process clearly and helps you understand what to expect at each step. 

• Speed and reliability – Condo loan reviews can take longer than traditional loans. Look for a lender known for efficient underwriting and responsive service.

Your Loan Can Make All the Difference

Buying a condo is an exciting milestone, and one that comes with its own unique considerations. The good news is that there are multiple loan options designed to meet a wide range of financial situations and homebuying goals. 

Whether you’re looking for a low down payment option through an FHA loan, leveraging a VA loan or pursuing a conventional loan for a primary residence, the key is understanding your options and working with an experienced and knowledgeable team. 

Ready to take the next step in your condo-buying journey? Reach out to one of our mortgage bankers to walk you through your options.