How to Buy a Condo: Mortgage Guide

Fannie Mae and Freddie Mac classify a condo project as warrantable when it meets all of the following: (1) at least 51% of units are owner-occupied (not investor-owned); (2) no single entity owns more than 10% of the units; (3) the HOA is not in litigation over construction defects or major safety issues; (4) at least 10% of the HOA budget is allocated to reserves; (5) commercial space is 35% or less of the building's total square footage; (6) no more than 15% of units are 60+ days delinquent on HOA dues. Non-warrantable condos require portfolio lenders, non-QM products, or jumbo financing — often at higher rates. See Fannie Mae Selling Guide — Condo Projects.

Yes — but only in approved condo projects. FHA requires the condo development to be on the HUD-approved list or obtain spot approval (Single Unit Approval for buildings with 10+ units where 10–50% of units may qualify). VA uses its own approved project list. FHA approval requires: owner-occupancy ≥51%, no more than 10% of units owned by one entity, reserve fund ≥10% of budget, no pending major litigation. VA approval is broadly similar. Check approval status at the HUD condo approval lookup. USDA also has a condo approval process for eligible rural areas.

HOA fees are included in your debt-to-income (DTI) ratio and monthly housing expense. Lenders add HOA dues to your PITI (principal + interest + taxes + insurance) when calculating DTI. Example: if you're buying a $400,000 condo with a $2,100/mo mortgage payment and a $450/mo HOA fee, your total housing cost is $2,550/mo — lenders use this to assess affordability. High HOA fees can reduce your maximum loan amount. Special assessments are also scrutinized. Ask the HOA for a 12-month budget, reserve study, and meeting minutes. Use the mortgage payment calculator to model HOA impact on your budget.

A condo questionnaire (also called a condo cert or HOA questionnaire) is a form completed by the HOA or property management company. Lenders require it to verify project eligibility. It covers: owner-occupancy %, total units, number of units in foreclosure or delinquency, pending litigation, reserve fund balance, commercial use %, insurance coverage, and any recent or planned special assessments. Fannie Mae Form 1076 is the standard document. HOAs often charge $100–$350 to complete it — typically paid by the buyer. Processing time is 5–15 business days, so order early. See Fannie Mae Condo Project Questionnaire (Form 1076).

A condotel (condo hotel) is a condo unit in a hotel-style building where owners can rent out their unit through a hotel management program. Most conventional lenders avoid condotels — they fail warrantability because the building is run as a hotel (rental pool, transient occupancy, front desk, etc.). Fannie/Freddie will not purchase condotel loans. Options: portfolio lenders (keep the loan on their books), non-QM lenders, or DSCR loans (debt service coverage ratio loans for investment properties). Expect rates 0.5%–1.5% higher than standard condos and larger down payments (often 20–30%). See non-QM loan growth 2027 for more on portfolio products.

A reserve fund covers major repairs — roof, elevators, parking, facade, plumbing. Warning signs: (1) reserve fund below 10% of annual budget (Fannie Mae minimum); (2) reserve study not updated in the past 3 years; (3) recent or pending special assessments (extra one-time charges to unit owners); (4) HOA dues significantly lower than comparable buildings (may indicate underfunding); (5) prior deferred maintenance. Request the most recent reserve study and last 2 years of HOA meeting minutes — minutes reveal disputes, litigation, and planned projects. In Canada, this is called a depreciation report or reserve fund study — required by condo legislation in most provinces. See CFPB mortgage resources.