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The Lowdown on Condo Mortgages & Rates Florida...

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A condominium, or condo, is one of the most popular forms of residence, especially among working professionals, retirees, and young couples embracing the joy of first-time homeownership. But while they are a frequent choice for new and veteran homeowners and appear to function similarly to apartments at a glance, it also bears reminding that there are many key differences for prospective condo loan applicants to be aware of.

We’re here to make the process a whole lot easier, with tools and expertise that will help guide you along the way, starting with our FREE Condo Mortgage Rate Quote.

We’ll help you clearly see differences between loan programs, allowing you to choose the right one for you whether you’re a first-time home buyer or a seasoned investor.

What Is A Condo?

Condos – Buildings that are divided into and made up of individually owned units. Although similar in nature to apartment buildings, each residence inside them is the property of a specific owner as opposed to a landlord or property management firm. In effect, condo owners own only the portion of the structure in which they reside - specifically, the interior of their residence, as external and shared areas of the building are typically owned and managed by a condo or homeowners association (HOA).

HOA – A group of owners who collectively work together to set and enforce building rules and guidelines - and shoulder the burden for any shared expenses. Put simply: A condo owner is responsible for everything that goes on inside their unit, including maintenance and repairs, and will pay regular fees to the condo association for upkeep of shared areas, which are instead the HOA's responsibility to maintain.

In general, condo owners are responsible for abiding by the HOA's rules, being respectful to their neighbors and maintaining their own individual residence. By way of contrast, homeowners associations are responsible for maintaining common areas such as hallways, yards, recreational facilities and courtyards, and providing upkeep of grounds (shoveling snow or trimming trees as needed).

Condos are a popular choice for first-time home buyers as they're often smaller, more affordable, and less demanding or time-consuming to maintain than single-family residences.

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Warrantable Vs. Nonwarrantable Condos

A warrantable condo is one that potential home buyers can finance and underwrite using a conventional mortgage. In order to do so, the condo must first meet certain minimum guidelines laid out by traditional mortgage investors like Freddie Mac and Fannie Mae. For example, to meet these requirements, sample guidelines include stipulations such as:

  • No single entity can own more than two units in projects consisting of five to 20 units, or 20% of units in projects consisting of 21 or more units.
  • At least 50% of the units are owner-occupied as opposed to being investment properties.
  • Less than 15% of total units are 60 days or more in arrears on association dues.
  • The homeowners association (HOA) is not named in any lawsuits.
  • Commercial space accounts for 35% or less of the total building square footage.

Non-warrantable condos are more difficult to buy and sell, as Freddie Mac and Fannie Mae have determined them to be too risky an acquisition, making them more difficult to acquire financing for. To obtain a non-warrantable condo, you may have to seek outside financial assistance beyond that which could typically be obtained through a conventional mortgage or traditional lender. Feel free to speak to one of our Home Loan Experts about your options.

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What Types Of Condo Loans Are Available?

The type of condo that you wish to buy and the intended uses that you have for the property will help you determine the type of residential financing that you need. Once you've narrowed your choices down, there are several different types of loans that can help you with your purchase:

  • Conventional loan: A traditional fixed-rate or adjustable-rate mortgage (ARM) with assigned monthly payments and term periods. To qualify, you'll need to establish a certain minimum credit score and debt-to-income ratio and provide a down payment and select personal details.
  • FHA loan: Short for Federal Housing Authority (FHA) loans, refers to a type of federally backed loan product with less stringent credit requirements and lower down payments attached. Be advised, though: FHA condo rules are stricter than the rules that this government agency applies to single-family homes.
  • VA loan: Veterans Administration (VA) loans are reserved for members of the military, veterans and eligible surviving spouses. Individuals who qualify for these financial products will find their applications backed by the federal government, allowing them to obtain more favorable terms from lenders.
  • USDA loan: A U.S. Department of Agriculture (USDA) loan is offered to property owners in select rural areas. These loans are typically designed for low-income Americans with poor credit and may come with low-interest mortgages and zero down payments attached.

The Pros And Cons Of Owning A Condo

Purchasing a condominium using a condo loan is often a good bet for families just starting out or individuals who wish to put minimum maintenance and upkeep into their residence.

Pros

  • No exterior property maintenance or need to upkeep grounds
  • Often cheaper than a single-family home
  • Access to building amenities
  • Shared cost of select building expenses
  • Less stressful to leave unoccupied for frequent travelers

Cons

  • Monthly fees and HOA dues, plus occasional special assessments
  • Close proximity to neighbors
  • More rules and restrictions on occupants and guests
  • Typically smaller in size than stand-alone residences
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Things To Consider About Condo Loans

While often generally comparable to loans extended on single or multifamily houses, sometimes condo loans can be more expensive. That's because these loans may be considered riskier to lenders, as condominiums introduce more quirks and restrictions as related to shared and/or jointly owned building spaces.

Prospective condo owners should ask homeowners associations and seller's agents to provide a full overview of building rules (and finances) before applying for a condo loan. That may mean asking to see important clauses and covenants, pet regulations, information on annual dues and planned expenses and more. Note that some condo associations may also wish to conduct an introductory interview with you as well.

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The Bottom Line

Condo loans are specifically designed to help potential home buyers facilitate the purchase of condominium units. They're available in many familiar forms from the same lenders who may extend mortgage loans on single- or multifamily residences. Potential buyers in the market for a new condominium may wish to consider other similar home options such as apartments as well.  If you're ready to get started, you can apply online or give us a call at (844) 777-1616.

  • Fixed Rates
  • Adjustable Rate Mortgage (ARM)
  • Conforming Loans
  • Jumbo & Super Jumbo Loans
  • FHA, VA, & USDA Loans
  • Terms from 5 to 30 Years

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