So you’ve found a condo that you love. Congrats! Few things are as exciting as finding a place that feels like home.
Yet before a condo can become your home, you need to secure financing. As a first-time condo buyer, it’s important to understand that financing a condo isn’t the same as financing a house. Lenders have specific requirements for condo loans, and the condo association plays a role in whether or not a lender will grant a loan.
For a few years after the housing market crashed, it was difficult to secure financing for a condo. Owners weren’t paying their condo dues, putting many condos in difficult financial straits and making lenders leery of lending to condo buyers.
Fortunately, lenders and government have eased the restrictions that followed the foreclosure crisis. This is a better time to secure a condo loan than it has been in years.
Here’s what you need to know about securing financing so you can make that dream condo yours.
What’s So Different About a Condo Loan?
Where your finances are concerned, nothing. To qualify for a condo loan, you will need good credit and a stable income, just like anyone who applies for a home mortgage or any other sizable loan.
But your finances are only one part of the equation. Lenders will be concerned with more than only your financial stability — they will want to ensure the entire condominium building is financially stable. Essentially, not only do you have to qualify for the loan, but so does the condo association you hope to be a part of.
Your realtor should understand the rules that guide condo loans, and be able to determine if your condo association will qualify for a loan. But if you have any doubts, or you want to better understand your chances of qualifying for a loan, it’s important to understand these rules yourself.
Condo Loan Rules
As you look at condos, consider not only whether you like the building and the unit, but whether the condo association has sound financial management. Banks are selective about the condos they issue loans for. Lenders look for condo associations where there is:
- Adequate and appropriate insurance
- Adequate budget reserves
- No pending litigation against the association
- No single investor that owns more than 10% of the units
Essentially, the bank wants to be sure the condo community is both financially sound and has ample involvement from condo owners.
Other Financing Options
If you aren’t able to secure a traditional mortgage for your condo, don’t despair just yet. There are other options, such as:
- Portfolio loans. If your condo doesn’t meet the requirements of a mortgage company like Fannie Mae or Freddie Mac, there are lenders who fill the gap with portfolio loans. They keep these loans, rather than selling them like large mortgage companies do.
- Personal loans. Depending on your financial situation and credit score, a personal loan may be an affordable way of helping to finance your condo or your down payment.
Financing a condo is considerably easier today than it was a few years ago. Take the time to understand what you’ll need to approach a lender, and then talk to lenders to see how you can finance your new home. Ultimately, the decision is in their hands. Good luck!
Sky is a condo community on the Vegas Strip, where we offer high-class amenities and an elite living experience, with luxury amenities like complimentary 24-hour valet service, a putting green, spas, and more. Get in touch with us today to learn more about choosing a condo at Sky.