Mortgages & Financing
How is financing a condo different from financing a house?
By Steve Lockhart
The short answer
The difference is the project. A single-family loan mostly reviews you and the property; a condo loan reviews the entire building as well, because the collateral is the shared project, not just your four walls.
Full answer
The difference is the project. A single-family loan mostly reviews you and the property; a condo loan reviews the entire building as well, because the collateral is the shared project, not just your four walls. The lender checks the HOA budget, the reserves, the insurance, the owner-occupancy rate, and the project approval status. The HOA dues also count directly into your debt-to-income ratio, which is why two homes at similar prices can carry very different monthly totals depending on the association fee. The appraisal compares your unit to other units in the building and neighborhood, not to detached houses. When we help a buyer purchase a condo, the work includes the HOA packet, the project status, and the actual dues line before the offer is written. The building has to pass the loan as much as the buyer does, and we verify that early.
Go a little deeper
Frequently asked
Questions people often follow up on
Why are some condos hard to finance?
Lenders review the whole association, and a project can stumble on an owner-occupancy ratio that is too low, thin reserves, an insurance shortfall, or pending litigation. Two similar units in different buildings can have very different lending outcomes for reasons entirely about the project. We verify the project approval before the offer, not after.
Do HOA dues really count against my mortgage?
Yes, the dues are a fixed monthly housing cost, so the lender folds them into the debt-to-income math and your budget should too. A lower priced home with high dues can be costlier monthly than a slightly higher priced home with none. We compare the total monthly line, not the price tag.
What else should a condo buyer watch?
Special assessments, when the association passes a mandatory bill for a roof or a facade, the state of the reserves that fund future repairs, and the master insurance policy that covers the building. The HOA packet tells the whole story, and we read it carefully before committing to the unit.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: run the HOA packet and the project approval alongside the down payment and the DTI before we write an offer. The unit is half the decision and the building is the other half, so we evaluate both before a dollar moves. In a condo market that is how the closing stays on schedule.
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