Buying Condominium Versus Single-Family Homes Mortgage Guidelines

Buying Condominium Versus Single-Family Homes

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will cover and discuss buying condominium versus single-family homes. Are you looking to buy a condo? Condominiums are becoming increasingly popular today than ever before due to many reasons Many seniors who own single-family homes are downsizing to condominiums due to maintenance issues. Millennial homebuyers are finding more interest in buying a condo versus a single-family home. This holds true for those who travel often.

Benefits of Buying Condominium Versus Single-Family Homes

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Condos are more secure than single-family homes when it is kept vacant. Burglars will think twice about robbing a condominium unit than a single-family home when the homeowner is not around. However, lenders consider condos riskier investments than single-family homes. Therefore, there are pricing adjustments on mortgage rates on condos. The hurdles condo buyers face when applying for a mortgage. One of the biggest hurdles that has been overcome is HUD now accepts FHA Spot Loans as of 2020. FHA Spot Approvals enables condo buyers in a non-HUD Approved Condo Complex on a case by case basis. FHA Spot Loans were very common many years ago but HUD has discontinued them. Now FHA Spot Loans are back in full force at Gustan Cho Associates.

Obstacles Buying Condominium Faced By Mortgage Borrowers

Are you running into any obstacles?  Many loan officers are unsure of the true process for purchasing a condo. Gustan Cho Associates are experts in condo financing. We even offer mortgages on non-warrantable condos. We will dive into alternative and non-QM loan programs later in this article. In this article, we will detail the differences or buying a condo versus a single-family home, the difference between a warrantable and non-warrantable condo, and the steps to apply to purchase a condo. We will cover the hurdles of buying condominium versus single-family homes. Gustan Cho Associates has many different types of loan programs for condo buyers.

What Are Condominiums

A condominium is a private residence located in a residential building or residential community, where individual units are owned privately. Unlike an apartment, many different owners make up the community. With an apartment, one owner rents out all units to the community. Many condo complexes have added amenities such as a swimming pool, workout facility, and laundry. They usually have homeowner’s association dues. The association dues take care of maintenance, landscaping, and insurance is needed for the property. You are only required to have “walls in” insurance if you have a mortgage on a condo. The association insures the outside of the complex and you pay this out of your association dues.

Difference Between Buying Condominium Versus Single-Family Homes

What is the difference between Buying Condominium Versus Single-Family Homes? With a single-family home, you own your entire parcel of land. You own the land and the structure of the home. You are responsible to ensure the entire dwelling (land and structure) on your own. Some single-family homes also have homeowners’ association dues with their neighborhoods. These are usually called PUDs or planned unit development.

What Are PUDs Versus Condos?

The difference with a PUD versus a condo is with a PUD, you own the land. With a condo, you own the inside of your unit, and the complex owns the land. When purchasing a condo, lenders have additional guidelines they must follow. Non-Warrantable Condos are also considered to be slightly more risky loans which sometimes associated with slightly higher interest rates.

Buying Condominium That Is Classified As Non-Warrantable

What is the term non-warrantable condo mean? By now you have understood that condo financing is slightly tougher to achieve than single-family home financing. Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties where they will allow mortgage financing. FHA and VA go one step further. They have an approved list of condominium complexes they will allow financing on. If your complex is not on this list, you may not utilize an FHA or VA loan to purchase his property. If a condo complex does not meet Freddie Mac and Fannie Mae’s warrantable standards, they are considered to be non-warrantable.

Warrantable Condominium Guidelines

How to purchase a non-warrantable condo?

We will dive into how to purchase a non-warrantable condo later in this article. A condo complex is usually considered warrantable if:

  • More than half of the units are owner-occupied
  • Less than 15% of the condo units past due association fees
  • The homeowner’s association is not involved in any lawsuits
  • Commercial space accounts for 25% or less of the total building square footage

No single person or developer owns more than 10% of the total units within the complex.

FHA And VA Condo Mortgage Guidelines

FHA and VA have a few extra requirements before they will consider a condo complex approved. At least half the condo units must be owner-occupied. For a newly built condominium project, at least 70% of the units must be sold.

Condominium Questionnaire Required by Mortgage Lenders

When purchasing a condominium, you will need to have a condo questionnaire completed by the condominium themselves. This questionnaire will go over all insurances and occupancy ratios as well as many other questions related to the financials of the complex. This will allow the lender to verify if the condo complex is warrantable or non-warrantable. S stated above, if you are using an FHA or VA loan, the condo complex must be on the approved list.

Follow the links below for the approved lists:

Gustan Cho Associates are able to prescreen approved condos in advance for our clients. For many condominium complexes nationwide, we already have the condo questionnaire in a database. Please keep in mind to utilize this database, certain qualifications to apply. This can save our clients time and money when purchasing a condo. Please call Mike Gracz on (800) 900-8569 for more information. You may also email the name of the condo complex to and we will scrub our database.

Buying Condominium That Is Non-Warrantable

How to purchase a non-warrantable condo?

As you already know, Gustan Cho Associates is licensed in 48 states with over 160 wholesale mortgage lenders with a wide range of mortgage products. We offer mortgages for non-warrantable condos. We also have mortgage products for CONDOTEL PROPERTIES. A non-warrantable condo will usually be reviewed on a case-by-case basis. The condo questionnaire will allow us to know if we can lend on the property or not. Please call us directly for more questions regarding non-warrantable condos.

Steps In Buying Condominium And Starting The Condo Mortgage Process

What are the next steps to purchasing a condo? The application for purchasing a condo is very similar to purchasing a single-family home. The only real difference is the condo questionnaire. To start the process of buying a condo, please gather the following information:

Next, you will contact Mike Gracz on (800) 900-8569 and go over your specific qualifications.  Mike will answer any questions you have and send you your application link. From here either Mike or one of the expert loan officers at Gustan Cho Associates will get you pre-approved. As you can see from this article, we are experts in condo financing. We encourage you to reach out directly to us for any condo related questions. Please call Mike Gracz on (800) 900-8569 for more information or text for faster response. The team at Gustan Cho Associates is available seven days a week, mornings and evenings. We offer top-notch customer service and strive to be up to date on all mortgage guidelines. The majority of our clients have either been denied by another lender or not getting the customer service they deserve. We look forward to helping you with all of your mortgage needs.

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