Financing a Condo with a USDA Loan
Can a USDA loan finance a condo? This is a common question from both homebuyers and Realtors who are unsure if it’s possible to finance through the USDA loan program. A USDA home loan offers flexibility and may be an option when trying to finance a condominium.
Please remember that USDA loans will only finance primary residences and not second homes or investment properties.
USDA Requirements for Condominiums
Condominium requirements per Administrative Notice 4699:
- Condominiums are deemed acceptable to RD (Rural Development) when the project has been approved by Fannie Mae (FNMA), Freddie Mac (FHLMC), HUD, or VA
- Lenders must retain evidence in their permanent loan file of the project’s approval by one of these four entities
- Applicant’s remain responsible to obtain individual homeowners insurance as applicable
Additional underwriting may be applicable depending on your lender. Red flags to look out for could be:
- % of investor occupancy in the project
- Date the project was completed and when it was turned over to the homeowner
- Review and analysis of applicable budgets and insurance coverage for the project
- Please note that just because there are association fees, does NOT mean it is always a condo
Be cautious, condominiums are a form of ownership and not tied to a specific building type. If you have any questions please consult with your Realtor or county property appraiser to determine if the home is actually a condo or other type of classification.