If you are interested in buying or refinancing a Condo, you need to know your mortgage options and requirements. Unlike when you want to buy a regular home, condo's have more restrictions and requirements. Here are the explanations for Condo financing for FHA, VA and Conventional Loans:
- FHA- If you want a FHA loan and plan on buying or refinancing a Condo, the Condo must be FHA Approved. Instructions on how to verify if a Condo is FHA approved. Also Make sure that you look at the comments section, for any other information. The owner occupancy rate must also be 51% or higher, even if the condo project says it is approved. The owner occupancy rate, is the % of people who actually own the condo and live in it. Also, pay attention to approval expiration dates.
- VA- Just like with FHA, to finance a condo with a VA mortgage it must be VA Approved. Instructions on how to verify if a Condo is VA Approved.
- Conventional- This is where it gets tricky. The min down payment on a Conventional loan for a Condo is 10%. If your down payment is less then 20%, then the owner occupancy rate must 70% or higher. If the owner occupancy is under 70% then the buyer must qualify for a "limited review". This is more of a case by case example and has to do with your Fannie Mae approval and them not requiring the owner occupancy to be a certain %. So in theory, you could qualify for a mortgage on a Condo with an Owner Occupancy under 70% but it would depend on your mortgage approval.
I know what you are thinking, "Holy Cow, this is confusing" and you are right. Lets keep it simple, if you are using a FHA or VA Mortgage the Condo must be Approved. If you plan on using a conventional loan and the owner occupancy is over 70% you should be fine. If the owner occupancy is under 70% then you want to be prepared to put 20% down payment. And you must be approved for a "limited review". If you plan on buying a Condo make sure your mortgage person knows this and go over your options with them. And before making an offer do your research on the condo complex, ex is it FHA or VA Approved, etc. And Good Luck!!