Buying a condo or coop is a little different than a typical home, lets go over the main difference and tips to help you finance it. Your lender also looks at the building’s finances as a whole. Lets see what that means for your rate, your down payment, and what to check before you make an offer.
Updated: September 10, 2026
Why Some Condo Buildings Are Harder to Finance
Before approving your loan, lenders also check the health of the whole building. If the building doesn’t pass, you can’t get a normal loan on it, no matter how strong your own credit and income are. Buildings that pass this check are sometimes called “approved,” while buildings that don’t are called “not approved.”
What Lenders Check About the Building:
- At least half the units are lived in by their owners, not rented out, though this rule has loosened recently for older, established buildings
- No single investor or company owns too many units in the building
- The homeowners association (HOA) has enough money saved for repairs, usually judged as a share of its yearly budget
- Not too many owners are behind on their monthly HOA fees
- The building isn’t involved in a major lawsuit
- The building isn’t mostly commercial space, like stores or offices
MFP Tip: These rules changed in 2026 and are still shifting. Ask your loan officer to check the specific building before you make an offer, don’t rely on older articles or general rules of thumb.
How to Qualify for a Condo Loan
If the Building Passes the Check:
- Down payment as low as 3% to 10% for a home you’ll live in, similar to a single-family house
- Interest rate typically 0.125% to 0.375% higher than an equivalent single-family home loan
- FHA and VA loans available if that specific building has been approved for those programs
If the Building Doesn’t Pass:
- You’ll need a lender who specializes in these situations, since most banks won’t offer a standard loan
- Down payment typically 20% to 30%
- Interest rate typically 0.75% to 1.5% higher than a normal condo loan
HOA Red Flags to Watch For
Frequent or Large One-Time Bills: These are called special assessments, extra charges owners pay for major repairs. An occasional one is normal, but frequent or large ones can signal the building has been neglected or poorly budgeted.
Many Owners Behind on Fees: If a large share of owners aren’t paying their monthly dues, the building can’t afford its own upkeep or savings.
No Recent Repair Inspection: Ask if the HOA has had a professional check of the building’s condition and savings within the last few years. Without one, it’s hard to know if enough money is actually set aside for future repairs.
An Ongoing Lawsuit: A building involved in a lawsuit over construction problems or HOA mismanagement can become harder to finance, and harder to sell later too.
Very High Insurance Costs: Common in coastal or hurricane-prone areas. If the building’s insurance policy has a very high amount owners must cover before insurance kicks in, that’s a sign costs will likely keep climbing.
MFP Tip: Ask for the HOA’s last 2 years of board meeting notes, not just the budget. These notes often reveal maintenance problems or disagreements before they show up in the official numbers.
Documents You’ll Need
Condo purchases require the standard mortgage paperwork, plus a full set of information about the HOA. See our condo and co-op documents checklist for the complete list, including the building questionnaire and HOA finances.
Pros and Cons of Buying a Condo
Benefits
Lower Maintenance Burden: The HOA handles exterior repairs, landscaping, and often building insurance.
Shared Amenities: Pools, gyms, and common spaces come without the individual upkeep of owning them yourself.
Often More Affordable: Condos frequently cost less than a comparable single-family home in the same area.
Cons
Monthly HOA Fees: A recurring cost on top of your mortgage payment, and one that can rise over time.
Building-Wide Risk: If the building later fails the financing check, it can be harder for you to sell, even if your own finances haven’t changed.
Less Control: Rules, renovations, and even rental restrictions are set by the HOA board, not you alone.
FAQs: Condo and HOA Financing
How do I know if a condo building will be easy to finance before making an offer?
Ask your lender to check the building before you go under contract. This looks at how many units are owner-occupied, how much the HOA has saved, whether there’s a lawsuit, and how many owners are behind on fees.
Can I still buy in a building that doesn’t pass the check?
Yes, through a lender who specializes in these situations, though expect a larger down payment and a higher rate than a standard condo loan.
Does a house in an HOA neighborhood need the same check as a condo?
No. A single-family home in an HOA community doesn’t require the building-wide check. Lenders typically just confirm dues are current and there’s no lawsuit against the association.
What happens if the building fails the check after I already own there?
Your existing loan isn’t affected, but future buyers may have a harder time getting financing, which can affect how easily you can sell and for how much.
Are co-ops financed the same way as condos?
Not exactly. With a co-op, you’re buying shares in a company that owns the building rather than owning your unit directly, and the building’s board often has its own approval process on top of the mortgage process.
MFP Tip: Ask for the building questionnaire and repair inspection as early as possible in your search, not after you’re already under contract. Building-level issues are the most common reason a condo purchase falls through.