Condo Mortgage Requirements: HOA Approval and Financing Rules

Condo mortgages have additional requirements beyond single-family homes. The condo project must be “warrantable”—meaning it meets lender guidelines for owner-occupancy (typically 50%+ owner-occupied), reserves (at least 10% of budget), insurance coverage and financial health. Non-warrantable condos require portfolio loans with higher rates and larger down payments. Get your condo approved early in the process to avoid surprises.

What Makes a Condo Warrantable?

Warrantable vs Non-Warrantable

Warrantable condos meet Fannie Mae/Freddie Mac guidelines and qualify for conventional financing with standard terms.

Non-warrantable condos don’t meet guidelines and require special financing with higher rates and larger down payments.

Key Warrantability Factors

Factor	Requirement
Owner-occupancy	50%+ owner-occupied (some flex)
Single-entity ownership	No one owner has 10%+ of units
Commercial space	Under 35% commercial
Reserves	10% of budget minimum
Insurance	Adequate master policy
Litigation	No significant pending litigation
Delinquencies	Under 15% of units delinquent
Presales (new)	50%+ presold before financing

Common Non-Warrantable Situations

Projects that often don’t qualify:

Hotel-condos or condotels
New projects with few sales
High investor ownership
Significant HOA litigation
Inadequate reserves
Excessive commercial space
Single owner with many units
Manufactured housing communities

Condo-Specific Requirements

HOA Questionnaire

Lenders require a completed HOA questionnaire covering:

Number of units and owner-occupancy rate
Reserve fund balance
Pending litigation
Delinquency rates
Insurance coverage
Budget information
Special assessments

Cost: $100-$500 (paid by buyer usually)

Timeline: 1-2 weeks to complete

Master Insurance Policy

The HOA’s master insurance must include:

Hazard insurance (fire, wind, etc.)
Liability coverage
Fidelity bond (for HOA embezzlement)

Your individual policy covers your unit’s interior and personal property.

Reserve Fund Requirements

Loan Type	Minimum Reserve
Conventional	10% of budget
FHA	10% of budget
VA	Flexible

Why it matters: Inadequate reserves lead to special assessments that burden owners.

Litigation Restrictions

Generally problematic:

Construction defect lawsuits
Litigation involving more than 10% of units
Suits threatening association solvency

Usually okay:

Minor litigation
Lawsuits where HOA is plaintiff (collecting dues)
Settled matters

FHA Condo Approval

FHA-Approved Condos

FHA requires the entire project to be approved, not just your unit.

Check approval status: HUD’s approved condo list (search online)

Single-Unit Approval (SUA)

If the project isn’t approved, FHA allows single-unit approval with:

50%+ owner-occupancy
10%+ reserves
No significant litigation
Adequate insurance
Unit is in project of 2-4 stories

Limitations: Stricter requirements than full project approval.

FHA Condo Requirements

Requirement	Guideline
Owner-occupancy	50%+
FHA concentration	Under 50% FHA-insured
Single owner limit	Under 10% of units
Commercial space	Under 35%
Presales (new)	50%+ sold

VA Condo Requirements

VA-Approved Condos

VA maintains its own approved condo list.

Check approval: VA’s condo approval page

Getting Approval

If not approved, the lender can request VA approval:

Submit HOA documents
VA reviews
Approval typically takes 1-2 weeks

VA Condo Guidelines

Generally more flexible than FHA:

No strict owner-occupancy requirement
Less stringent reserve rules
Project-by-project evaluation

Conventional Condo Requirements

Fannie Mae Guidelines

Most conventional loans follow Fannie Mae rules:

Factor	Requirement
Owner-occupancy	50%+ (varies by review type)
Reserves	10% minimum
Single owner	Under 20% (primary) or 10% (investment)
Delinquencies	Under 15% of units 60+ days late
Commercial	Under 35%
Insurance	Per Fannie guidelines

Review Types

Limited review: Streamlined for established projects, primary residence, low LTV

Full review: Required for investment, high LTV, new projects

Project eligibility review service (PERS): For complex or non-standard projects

Non-Warrantable Condo Financing

When Standard Financing Won’t Work

If the condo doesn’t meet guidelines:

Hotel-condos/condotels
High investor concentration
Insufficient reserves
Pending litigation
New projects with few sales

Financing Options

Portfolio loans:

Lender keeps loan (doesn’t sell to Fannie/Freddie)
More flexible guidelines
Higher rates (0.5-1% above conventional)
Larger down payments (20-25%)

Non-QM loans:

Alternative documentation
Higher rates
Larger down payments
Less favorable terms

Asset-based loans:

Qualify on assets rather than income
Very high net worth required
Premium pricing

What to Expect

Factor	Warrantable	Non-Warrantable
Down payment	3-20%	20-25%
Rate premium	None	+0.5-1.5%
Availability	Most lenders	Limited lenders

Condo Buying Process

Step 1: Identify Condo Approval Status

Before making an offer:

Check FHA/VA approved lists
Ask listing agent about warrantability
Research HOA financial health

Step 2: Factor in HOA Costs

Monthly fees include:

Building maintenance
Common area upkeep
Insurance (master policy)
Amenities
Reserve contributions

HOA fees count in your DTI calculation.

Step 3: Review HOA Documents

Request and review:

HOA bylaws and CC&Rs
Budget and financial statements
Meeting minutes (recent)
Reserve study
Rules and regulations

Step 4: Lender Approval

Your lender will:

Order HOA questionnaire
Review for warrantability
Identify any issues
Approve or decline project

Step 5: Close

Similar to single-family, plus:

HOA transfer fees
Move-in deposits (sometimes)
Welcome packet and rules

HOA Financial Red Flags

Warning Signs

Inadequate reserves:

Under 10% of budget
No reserve study
Deferred maintenance visible

High delinquency:

Many units behind on dues
Frequent special assessments
Collections activity

Pending litigation:

Construction defect claims
Large settlements pending
Threatening financial stability

Single-owner concentration:

Developer still owns many units
Investor owns significant portion
Rental conversion happening

Questions to Ask

What are the current reserves?
Is there pending or threatened litigation?
What percentage of owners are current on dues?
Are any special assessments planned?
What major repairs are upcoming?
What’s the owner-occupancy rate?

Condo Insurance

Master Policy (HOA)

Covers:

Building exterior and structure
Common areas
Liability for common areas
Sometimes interior walls/fixtures

Types:

Bare walls: Covers structure only
Single entity: Covers original fixtures
All-in: Covers all fixtures including upgrades

Your Individual Policy (HO-6)

Covers:

Personal property
Interior improvements/upgrades
Personal liability
Loss assessment (for HOA claims)
Living expenses if displaced

Cost: $200-$600/year typically

Coverage Gaps

Understand what the master policy covers:

If bare walls: You need more coverage
If all-in: You need less coverage
Always cover personal property

Costs Unique to Condos

Monthly HOA Fees

Type	Typical Range
Basic	$200-$400
Amenities	$400-$700
High-rise/luxury	$700-$1,500+

One-Time Fees

Fee	Typical Cost
HOA questionnaire	$100-$500
Transfer fee	$100-$400
Move-in deposit	$200-$500
Capital contribution	$500-$2,000

Special Assessments

Unexpected charges for:

Major repairs (roof, elevator, facade)
Legal settlements
Reserve shortfalls
Emergency repairs

Can be thousands of dollars with little notice.

Frequently Asked Questions

What is a warrantable condo?

A condo that meets Fannie Mae/Freddie Mac guidelines for conventional financing. It has adequate owner-occupancy, reserves, insurance and no significant litigation or other issues.

Can I get FHA financing on any condo?

No. The condo project must be FHA-approved or qualify for single-unit approval. Many condos don’t meet FHA requirements.

Why do lenders care about HOA finances?

HOA financial health affects your ability to stay in your home. Underfunded HOAs lead to special assessments, deferred maintenance and declining property values.

Do HOA fees count in my DTI?

Yes. Your monthly HOA fee is added to your housing payment when calculating debt-to-income ratio.

What if my condo is non-warrantable?

You’ll need portfolio or non-QM financing with higher rates (0.5-1.5% above conventional), larger down payments (20-25%) and fewer lender options.

How do I find out if a condo is warrantable?

Ask the listing agent, check FHA/VA approved lists, or have your lender review the HOA questionnaire early in the process.

Are condos harder to finance than houses?

Yes. The additional project approval requirements can cause delays or denials. Start the approval process early and be prepared for potential issues.