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Financing A Condo: We Visit The Options Available

Posted On Monday, 24 January 2022 19:33
Financing A Condo: We Visit The Options Available

Financing a condo is in many ways similar to financing single-unit homes. You will need to apply for financing from your preferred lender and make a down payment just like you would when financing other property types. 

However, when seeking financing for a condo, lenders will not only be interested in your ability to finance a loan before approving your application. The good news is that there are many options for financing your dream of being a condo owner. 

Hard Money Lenders

Hard money lenders refer to entities that finance real estate investors for interest on the borrowed funds.

These types of lenders are private individuals or companies without an affiliation to a financial institution and have little regulation from the Federal Reserve Bank.

In most cases, this option will come in handy for persons having problems getting approval for conventional loans.

That’s perhaps because hard money lenders are less strict on approval and have very short approval times, usually a few days compared to weeks for conventional lenders. If you are looking to find hard money loans from lenders near you, this hard money resource can help you. 

FHA Condo Loans

Most first-time homebuyers prefer Federal Housing Association (FHA) backed loans to finance their homeownership dreams.

The main drawback of FHA condo loans is that the borrower can pay as low as 3% of the approved amount as a down payment. 

However, accessing an FHA-backed loan can be difficult due to the strict approval requirements for the borrower and the condominium.

For example, the condominium must be FHA approved, 50% of the condos must be owned, and the condominium must not have more than 30% of the units as security for loans.

V.A. Condo Loans

For military personnel, veterans, or veterans' surviving spouses, V.A. Condo loans are an excellent option for financing. The good thing about V.A. Condo loans are when the federal government backs the applications for qualifying candidates to help them get better terms for their loans. 

However, like FHA loans, V.A. condo loans also have stringent requirements for approval. For example, the unit and the entire building must be approved by the Department of Veteran Affairs.

Another limitation of this option is that it is only available for present and past members of the military and their spouses. 

USDA Loans

If you live in rural America, U.S. Department of Agriculture (USDA) loans may be an option you may want to explore. These loans are designed with low-income earners in mind and offer very attractive rates of as low as 1%, and no down payment is required.

Unfortunately, not everyone qualifies for this financing option. Some of the qualification requirements for this loan include:

  • The borrower must be a U.S. resident
  • The borrower must be a resident of an eligible rural area or any other area listed as eligible on the USDA's eligibility site
  • The borrower's income must demonstrate a need
  • The borrower must have a relatively good credit score, usually 640 or better. 

Cash

Not many people think of cash as a way of financing homeownership, but it is. This financing option is straightforward, you agree on the terms, pay up by check, bank transfer, or any other viable payment option, and have your condo.

The most significant drawback to this option is not many people have that kind of money laying around.

But this can be a good option for anyone who has received a big payout, such as an insurance payout or a portion of the inheritance. It is also possible to have someone that has saved up enough to buy a condo in cash, although it is extremely rare.

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