Condominium Financing: What You Need to Know Before Buying a Condo

Q: Can you buy a condo with an FHA loan?

Yes, if the project is FHA-approved or qualifies for single-unit approval. FHA condo loans allow 3.5% down with a 580 credit score, but the building must meet HUD standards for owner-occupancy, reserves and insurance. You can check a project's status on HUD's approved condominium list before writing an offer.

Q: What is an HOA questionnaire in condo financing?

It's a standardized form your lender sends the condo association to verify project details: number of units, owner-occupancy percentage, reserve funding, insurance coverage, pending litigation and special assessments. The answers determine whether the project is warrantable. HOAs may charge a fee to complete it, and slow responses are a common cause of closing delays.

Written by Samantha SheltonNMLS 1647301Updated October 2026

Buyer enjoying a condo balcony after securing condominium financing on a modern low-rise building

Condominium financing works like a standard mortgage with one big addition: the lender underwrites the building as well as the borrower. Conventional financing can reach 97% loan-to-value, 3% down, on a condo under Fannie Mae’s HomeReady program, which lists units in condos among eligible one-unit properties and caps qualifying income at 80% of area median income (Fannie Mae Selling Guide B5-6-01). That pricing only applies if the project is warrantable.

Warrantable means the project clears the agencies’ standards. Fannie Mae won’t buy a loan where commercial space exceeds 35% of the project or building, more than 15% of units are 60 or more days past due on HOA assessments, reserves get less than 10% of the budget, or the HOA is named in pending litigation over the building’s safety, soundness, habitability or functional use. Projects that fail are non-warrantable, and financing one means finding a lender that will keep the loan on its own books.

Learn what makes a condo warrantable, what your lender reviews about the association, how each program treats condos, and what to do when a project doesn’t qualify. For the wider map, start with our Loan Types & Programs guide.

Key takeaways:

Warrantable projects get standard pricing: Fannie Mae’s project standards cap commercial space at 35%, cap units 60 or more days past due on assessments at 15%, and require the HOA budget to fund replacement reserves at 10% or more.
Non-warrantable condos need a portfolio lender: Pending safety litigation, one entity owning more than 20% of the units in a project of 21 or more units, or commercial space above 35% pushes a project outside agency guidelines, and terms then follow each lender’s own book.
The association gets underwritten too: Lenders review reserves, delinquency, insurance and any unfunded repair costing more than $10,000 per unit due within 12 months, which is why a strong borrower can still be denied over the project.

What is condominium financing?

Condominium financing is a mortgage secured by an individual unit inside a condominium project, underwritten in two parts: your credit, income and assets, and the project’s legal, financial and physical condition. That second half is the whole difference between a condo loan and a loan on a detached house.

You own your unit’s interior plus an undivided interest in the common elements, land, roof, hallways, elevators, parking, grounds, which the homeowners association maintains with owners’ dues. Because the association controls assets your collateral depends on, agency guidelines require the lender to review it before the loan can be sold. Still weighing the property type? The pros and cons of buying a condo covers the trade-offs, and condo vs. co-op explains why lenders treat cooperatives differently.

What is a warrantable condo?

A warrantable condo is a unit in a project that meets Fannie Mae’s or Freddie Mac’s project eligibility standards, which allows the loan to be sold to those agencies on the secondary market. Everything else about condo financing follows from that one test.

Your lender establishes warrantability through a project review with a shelf life: a Full Review of an established project must be completed within one year of the note date, a new project within 180 days. Fannie Mae calls a project established when at least 90% of units have been conveyed to purchasers, construction is 100% complete, no further phasing is planned, and HOA control has passed to the owners. Anything short of that is a new project and faces a tighter review.

Factor	Warrantable project	Non-warrantable project
Who holds the loan	Fannie Mae or Freddie Mac buys it	The lender keeps it in portfolio
Commercial space	35% or less of the project or building	More than 35%
HOA dues delinquency	15% or fewer units 60+ days past due	More than 15% past due
Replacement reserves	At least 10% of the annual budget	Under-funded, or unfunded critical repairs
Single-entity ownership	2 units max in 11 to 20-unit projects; 20% max at 21+ units	One owner above those limits
Litigation	No pending suit over safety, soundness, habitability or functional use	Pending structural or safety litigation
Down payment and terms	Agency terms, down payments from 3%	Each lender’s own guidelines

Non-warrantable is a label about the building, not about you, and it’s often temporary: a lawsuit settles or reserves get funded, and the project qualifies again.

What factors decide condo loan approval?

Three project-level questions decide most condo files: is the association solvent, who lives in the building, and is anyone suing.

How healthy do the HOA’s finances have to be?

Healthy enough to clear two hard numbers and one judgment call. Fannie Mae requires the HOA’s projected budget to fund replacement reserves at at least 10% of the budget. Annual budgeted reserve allocation divided by annual budgeted assessment income, unless an acceptable reserve study supports a lower allocation, and allows no more than 15% of total units to be 60 or more days past due on common expense assessments, with that same 15% ceiling applied separately to each special assessment.

The judgment call is critical repairs. A project is ineligible when it needs work that significantly affects safety, soundness, structural integrity or habitability, mold or water intrusion, advanced deterioration, a failed jurisdictional structural inspection, or any unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months. Routine budgeted maintenance doesn’t count against it. Most of this reaches the lender through a project questionnaire, Fannie Mae’s Form 1076. Optional as a form, though the information it collects is not.

How much of the building has to be owner-occupied?

It depends on the project’s age and your program. For new and newly converted projects, Fannie Mae requires that at least 50% of total units in the project or legal phase be conveyed or under contract to principal residence or second home purchasers. Established projects are judged mainly on finances, insurance and litigation, though a renter-heavy building still draws scrutiny, because rental concentration drives delinquency.

FHA sets explicit floors: an approved condominium project must be at least 35% owner-occupied, and a unit cleared through Single-Unit Approval must sit in a project that is at least 50% owner-occupied.¹ HUD sets those percentages by notice inside a statutory band, the regulation requires the minimum to land between 30% and 75% of total units, so confirm the current figure.

How do litigation and commercial space affect eligibility?

Litigation is the fastest way to make a good building unfinanceable. A project is ineligible when the HOA, sponsor or developer is named in pending litigation relating to the project’s safety, structural soundness, habitability or functional use. Fannie Mae carves out minor matters: non-monetary disputes, suits the insurer has agreed to defend and cover, cases where the HOA is plaintiff and the impact is insignificant, and matters where anticipated damages and legal expenses are not expected to exceed 10% of funded reserves.

Commercial space is the other common disqualifier. No more than 35% of a condo project, or of the building it sits in, may be commercial or mixed-use, counted above and below grade as nonresidential square footage divided by total square footage. Rental apartments and hotels inside a project count as commercial even though they look residential; commercial parking is excluded. In a Special Flood Hazard Area, commercial space above 25% may also require supplemental or private flood insurance.

Condo loan options by loan type

Every major program will finance a condo. What changes is who approves the project and how much you put down.

Conventional loans

Conventional is usually the lower-cost path when a project is warrantable, with down payments from 3% through HomeReady for buyers at or under 80% of area median income. Size matters too: the 2026 baseline conforming loan limit is $832,750 for a one-unit property, with a high-cost ceiling of $1,249,125, exactly 150% of the baseline (FHFA, 2026). A condo above your county’s limit is a jumbo loan by definition, so “jumbo” is set by the limit, not a fixed dollar figure. Check the current conforming loan limits for your county, and see conventional loans for qualifying.

FHA loans

FHA requires a minimum investment of 3.5% of the adjusted value, and a credit score at or above 580 earns that maximum financing; 500 to 579 caps the loan at 90% LTV.² The catch is the project. It must be FHA-approved or qualify for Single-Unit Approval, approvals expire after 3 years, and FHA runs its own tests: reserves funded with at least 10% of aggregate monthly unit assessments, no more than 15% of units in arrears, and commercial space no greater than 35% of total floor area. Single-Unit Approval is concentration-limited too, at 10% of units in a project of 10 or more, or two loans in a smaller one. See HUD’s overview of FHA loans.

VA loans

VA finances condos on the same terms as any other VA purchase, but the project needs its own clearance: before VA guarantees a loan on an individual unit, the legal documentation establishing the project must be approved by the Secretary of Veterans Affairs.³ If the project already carries VA approval the file moves normally; if not, approval has to be pursued before closing.

Non-warrantable and portfolio loans

When a project fails agency tests, the loan has to be made by a lender that keeps it rather than selling it, a portfolio loan. Those lenders set their own guidelines, so down payment, reserve and pricing requirements vary and no universal figures apply. What doesn’t vary: a portfolio or non-QM condo loan is still a regulated mortgage, and the lender must make a reasonable, good-faith determination at or before closing that you can repay it, under 12 CFR 1026.43(c). Non-warrantable is not a synonym for no-documentation lending.

Here’s the arithmetic that decides most files. On a $250,000 condo, 3% down is $7,500 and 3.5% down is $8,750, but if the project is non-warrantable and a portfolio lender wants 20%, the same purchase needs $50,000.⁴ That gap is why project review belongs at the front of your timeline. Because Align is a broker, we can shop a non-warrantable file to lenders that specialize in it instead of declining it, our Specialty Financing hub covers related programs.

Which condos raise financing red flags?

Certain building types fail agency review often enough that experienced buyers check them first.

Condo hotels and short-term rental operations: A project managed and operated as a hotel or motel is ineligible even when units are individually owned, and timeshare, fractional and segmented-ownership projects are ineligible outright.
Mixed-use towers: The 35% commercial cap is measured on square footage, and rental apartments or a hotel inside the tower count as commercial. A building that feels residential can still fail the math.
New construction and phased projects: Expect the 50% presale test, and remember the project review stays valid only 180 days before the note date.
Small and investor-heavy buildings: Single-entity limits bite hardest here. 2 units is the ceiling in an 11 to 20-unit project, and in a 5 to 10-unit project that belongs to a master association.
Special assessments and failed inspections: Ask what the assessment funds. One paying for critical structural work signals deferred maintenance the lender will price for; one funding a new lobby usually doesn’t.

Before writing an offer, ask the association three things: how much is in reserves, what share of owners are behind on dues, and whether the HOA is party to litigation. When a project can’t be financed conventionally, buyers sometimes look at alternative financing options for home buyers, including a lease option, the right to buy later, not an obligation to, or a home equity sharing agreement. Neither fixes warrantability. The CFPB’s loan shopping resources help you compare offers.

What Michigan buyers should know

Michigan buyers hit a wrinkle that confuses out-of-state lenders constantly: a large share of the state’s detached, single-family subdivisions are legally condominiums. These are called site condominiums, and they’re a Michigan development norm, not an exotic structure.

Michigan law defines the unit by the master deed, not the walls: Under the Michigan Condominium Act, a condominium unit is “that portion of the condominium project designed and intended for separate ownership and use, as described in the master deed,” and a project needs no fewer than 2 units (MCL 559.104). That lets a developer create a neighborhood of freestanding houses where each unit is the house and its land.
FHA exempts true site condos from project approval: FHA defines a Site Condominium as a project made up entirely of single-family detached dwellings with no shared garages or other attached buildings, or of detached or townhouse dwellings where the unit is the dwelling and the land, with no manufactured housing. Site Condominiums require neither Condominium Project Approval nor Single-Unit Approval, provided insurance and maintenance costs are the owner’s sole responsibility, excluding landscaping.⁵
Fannie Mae waives project review on detached units: Review is waived for a detached condo unit, one sharing no walls, ceilings, floors, breezeways or garages with a neighbor, in both new and established projects, though insurance and appraisal requirements still apply.
The condo label still costs you paperwork: Even an exempt site condo needs a condominium rider and its own hazard coverage, and Michigan’s attached lakefront and downtown projects get the full review above.

How do you finance a non-warrantable condo?

Find out why the project is non-warrantable first, then match the lender to the reason. Lenders that keep these loans on their own books each accept some problems and refuse others, so the reason decides your options.

Five steps, in order

Get the project details early. Ask for the HOA questionnaire, budget, reserve figures, master insurance and any litigation details before you write the offer, or right after. Associations can take weeks to answer.
Name the reason. Pending litigation, too much commercial space, high delinquency, one investor owning too many units, a hotel-style operation or a new project short of its presales. Some of these are temporary.
Match the lender. One portfolio or non-QM lender may accept commercial space above the agency limit and refuse any pending lawsuit. Another may do the reverse.
Plan the cash. Expect a larger down payment, more reserves and pricing above a warrantable condo. Get the numbers in writing before you count on them.
Protect your deposit. Make sure your purchase agreement gives you enough time for the project review, not just your own approval.

When waiting is the better move

Some problems are temporary, like a lawsuit close to settling or a special assessment that will fund the reserves. Then the project may become warrantable again. Ask the association for a timeline. A conventional loan after the fix can cost far less over the years than a portfolio loan today.

Where non-warrantable condos show up in Michigan

Michigan’s site condominiums usually skip project review, because each unit is a house and its land. The non-warrantable files tend to be attached buildings: a downtown loft above street-level shops, or a lakefront building run like a resort. If the listing says “condo” and the building has a front desk or a storefront, ask about warrantability on the first showing.

Non-warrantable condo loans are one of the products Align places. The reason the project failed review decides which wholesale lender Samantha takes your file to, so send her the HOA questionnaire as soon as you have it. Condo files usually stall on paperwork passing between the lender, the association and the title company, and that is the part worth starting early.

How Align handles specialty financing

Specialty loans are where a single bank's menu runs out. Align places HomeStyle and FHA 203(k) renovation loans, non-warrantable condo loans, DSCR loans and standalone HELOCs through multiple wholesale lenders.

Samantha handles these files herself, from the first conversation to the closing table, with a processor supporting her behind the scenes. Complicated and impossible are not the same thing.

FAQ: Condominium financing

Here are answers to common questions about condominium financing.

Is it harder to get a mortgage for a condo than a house?

Often, yes. With a condo, the lender approves two borrowers: you and the building. Beyond your credit, income and down payment, it reviews the HOA’s budget, reserves, insurance, delinquency rate, occupancy mix and any litigation. A strong buyer can still be denied because the project fails agency guidelines, see the pros and cons of buying a condo.

What makes a condo non-warrantable?

Common triggers include pending litigation against the association over safety or structural soundness, one entity owning more than the allowed share of units, commercial space above 35% of the project, reserves funded below 10% of the budget, more than 15% of owners 60 or more days behind on dues, or unfunded critical repairs. Those projects need a portfolio lender. Investors should read our take on investing in condominium markets.

Can you buy a condo with an FHA loan?

Yes, if the project is FHA-approved or the unit qualifies for Single-Unit Approval. FHA allows 3.5% down for borrowers with a credit score of 580 or higher, but the project must clear HUD’s standards for owner occupancy, reserves, insurance and commercial space, and approvals expire after three years. Check the project on HUD’s approved condominium list first, then compare against conventional loans, which sometimes clear a project FHA won’t.

What is an HOA questionnaire in condo financing?

It’s a standardized form your lender sends the association to verify project details: unit count, occupancy, reserve funding, insurance, litigation and special assessments. Fannie Mae’s version is the Condominium Project Questionnaire, Form 1076; the form is optional and a similar one may be substituted, but the information isn’t. Associations often charge a fee and take weeks to respond, a frequent cause of closing delays, more in buying a home with an HOA.

The bottom line on condominium financing

Condominium financing puts the building on the application next to you. When the project is warrantable, a condo loan looks like any other mortgage, down payments from 3% under HomeReady, 3.5% with FHA at a 580 score, and conforming pricing up to the 2026 baseline limit of $832,750 on a one-unit property. When it isn’t, because commercial space tops 35%, more than 15% of owners are behind on dues, reserves sit under 10% of the budget, or the HOA is in litigation over the building, the loan moves to a portfolio lender whose terms aren’t published anywhere. The move that pays off for a condo buyer is checking the project before writing the offer. The same tests apply when you refinance a condo.

If you’re ready to buy a condo without guessing whether the building will finance, talk to Align Lending, we’ll shop your scenario across our lender network, including lenders that write non-warrantable condo loans, and show you the numbers side by side. Call 248-506-5727 or start online today.

Footnotes:

1. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA condominium project standards, including owner-occupancy minimums, are set by HUD in the Single Family Housing Policy Handbook 4000.1 and related notices within the statutory ranges at 24 CFR 203.43b, and are subject to change. Return to text.

2. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA credit score, minimum required investment and project approval requirements are set by HUD in Handbook 4000.1 and 24 CFR 203.43b and are subject to change. Return to text.

3. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. VA condominium project approval requirements are set at 38 CFR 36.4360 and are subject to change. Return to text.

4. Example figures in this article are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Down payment, reserve and pricing requirements on non-warrantable condo loans are set by each individual lender and vary widely. Your actual terms depend on your application, the project, and market conditions. Return to text.

5. Align Lending is not acting on behalf of or at the direction of FHA or HUD. The Site Condominium definition and its exemption from Condominium Project Approval and Single-Unit Approval are set by HUD in Handbook 4000.1 and at 24 CFR 203.43b(a)(7) and (j), and are subject to change. Return to text.

Figures current as of August 2026; verify current limits with the linked source before relying on them.

Sources: HomeReady eligibility for units in condos, LTV/CLTV/HCLTV ratios of 95.01 to 97%, and the 80%-of-area-median-income cap, Fannie Mae Selling Guide B5-6-01. Condominium Project Questionnaire (Form 1076) as an optional form, established and new project definitions, and project review expiration of one year (established) and 180 days (new), Fannie Mae Selling Guide B4-2.1-01. Waiver of project review for detached condo units, Fannie Mae Selling Guide B4-2.1-02. Ineligible project characteristics, including the 35% commercial and mixed-use cap, single-entity ownership limits of 2 units (5 to 10-unit projects in a master association and 11 to 20-unit projects) and 20% (21 or more units), litigation and pre-litigation policy with the 10%-of-funded-reserves minor-matter test, critical repairs including unfunded repairs above $10,000 per unit within 12 months, hotel and timeshare ineligibility, and the 25% commercial-space flood insurance note, Fannie Mae Selling Guide B4-2.1-03. Replacement reserves of at least 10% of the budget, with an acceptable reserve study permitted in place of that calculation, and the 15% cap on units 60 or more days past due on common expense assessments and on each special assessment, Fannie Mae Selling Guide B4-2.2-02. The 50% presale requirement for new and newly converted projects, Fannie Mae Selling Guide B4-2.2-03. FHA minimum required investment of 3.5% of adjusted value, maximum financing at a minimum decision credit score at or above 580 and a 90% LTV cap at 500 to 579; FHA condominium standards of at least 35% owner occupancy (approved projects) and at least 50% (Single-Unit Approval), Single-Unit Approval concentration of 10% of units (10 or more units) or two loans (fewer than 10 units), reserves funded at 10% of aggregate monthly unit assessments, no more than 15% of units in arrears, commercial and non-residential space no greater than 35% of total floor area, and Site Condominium treatment, HUD Single Family Housing Policy Handbook 4000.1. Statutory ranges of 25 to 55% for commercial space and 30 to 75% for owner occupancy, three-year project approval terms, and the Site Condominium definition, 24 CFR 203.43b. VA project approval prior to guaranty of an individual unit loan, 38 CFR 36.4360(c). 2026 baseline conforming loan limit of $832,750 for one-unit properties and a high-cost ceiling of $1,249,125 equal to 150% of the baseline, Federal Housing Finance Agency. Ability-to-repay determination required at or before consummation, 12 CFR 1026.43(c). Definitions of “condominium project” and “condominium unit,” Michigan Condominium Act, MCL 559.104.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Agency project standards, FHA and VA approval rules, loan limits and lender guidelines change, confirm current terms with a licensed professional and with the project’s own documents before you rely on them. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.