If you are among those interested in buying a condo unit of your own, here are some tips to help you out with financing it.
Before deciding on the condo to buy or the type of loan that will work for you, you first need to know your budget. That way, you will know what you can or cannot afford.
It is also smart to consult a real estate agent who specializes in condos. A knowledgeable Realtor can help you in finding the best one that will suit your needs, lifestyle, and financial capacity.
The challenge of getting a loan
Despite condos being lower priced than single-family homes, getting a loan for a unit is not necessarily easier. Because a condo unit is just part of a complex, lenders will take more factors under consideration before approving your mortgage. The underwriting process involves the unit you want to get as well as the rest of the condo complex.
Loan types for condos
The requirements for getting a condo loan also depend on the type of loan you are planning to get. The most common loans applied for by potential condo buyers are the Federal Housing Authority (FHA) loan, the VA condo loans, and the conventional loan.
If you are a first-time buyer, an FHA loan is more appealing since it requires down payments as low as 3.5% of the overall sale price and comes with less stringent requirements. However, the rules of an FHA loan for a condo are still stricter than those for a single-family home.
Click here for the updated set of rules for getting an FHA condo loan. The said update was made after the said agency also updated its Single Family Home Loan Handbook.
VA condo loan
While the FHA offers their loan to a more diverse set of condo buyers needing a mortgage, the Department of Veteran Affairs provides this loan specifically to both active and retired military personnel, as well as surviving spouses of departed servicemen. However, the requirements are almost similar to those of the FHA loan.
A conventional mortgage is easier to apply for than the FHA loan but it does require a bigger down payment, usually set at around 20%. Most lenders see condos as riskier investments than single-family homes, and thus, set higher dues for their own financial protection.
Note also that lenders often take the financial health of the entire condominium complex into consideration and look out for any red flags that might be found in the condo documents.
The basic rules for getting a conventional loan include the following:
- A minimum of 85% of the condominium complex’s homeowner association dues must be paid on time.
- A loan is granted if there are no restrictions or conditions to owning the property.
- The condominium complex must have proper insurance coverage, such as hazard, liability, and flood insurance.
If you are interested in a condo in Ogden, Utah, our realtors at Destination Properties can help you find what you are looking for. Call us at 801.745.2009 or email info(at)destinationproperties(dotted)com.