Buying a condo is not much different from purchasing a traditional home, except for obtaining financing. The guidelines for getting a mortgage to buy a condo are much more strict than for a traditional home purchase and a conventional loan, as compared to FHA, Fannie Mae, or Freddie Mac approved loan, makes the process even more complicated.
Hiring a Skilled Agent
Hire an experienced real estate agent. An agent will be familiar with the market and the properties in your area. The real estate agent should also be well versed in the process from start to finish, particularly the loan requirements, which are different for a condo purchase.
Obtaining a Loan Pre-Approval
Get pre-approved for a loan. After you have developed a budget, analyzed your monthly income and expenses, including condo fees, and decided how much you can afford. The next step is to get pre-approved for a loan. As an individual borrower, excellent credit, steady income, and a minimum 20 percent down payment are usually required.
Determining Condo Loan Eligibility Requirements
Determine if the condo building meets loan requirements. This is where purchasing a condo becomes more complicated than a traditional home purchase. Furthermore, buying a condo with a conventional loan adds to the difficulty. Banks are more inclined to lend when purchasing a condo with an FHA loan in an FHA approved building.
However, even when using a conventional loan, most lenders still follow FHA, Fannie Mae, and Freddie Mac guidelines when underwriting a condo loan. Those guidelines are much more strict than those for a traditional home purchase because in addition to the borrower they also require the condo building to meet certain standards as well. For example, the building must have sufficient insurance, no pending litigation, budget reserves, be at least 51 percent owner occupied, and no more than 15 percent of owners can be behind on monthly fees.
If a buyer wishes to purchase a condo in a building that does not meet these criteria, it would be more difficult to obtain a loan. This is where having an agent familiar with the area can be advantageous because they will be more knowledgeable about which properties qualify.
Finding the Unit You Want
Find a unit. Once financing is secured, the home buying process is not too dissimilar from purchasing a traditional home. Work with your real estate agent, to find properties that meet your criteria.
Making Offer and Closing Deal
Make an offer and close the deal. Inspect the property. Research listing and sale prices for similar condos in the area. Determine the market value and make an offer.
Based in Washington, D.C., Jeremy Watson is an engineer and urban planner. He has been involved with urban design, city infrastructure and business since 2008. Watson holds a Bachelor of Science in civil engineering from the University Florida, as well as a Master of Science in urban and regional planning from Virginia Tech.