A down payment on a condo can run anywhere from 0 to 25 percent of the purchase price. Where you land depends on three things: the loan program you use, whether you’ll live in the unit, and whether the building itself qualifies for standard financing. A first-time buyer in a primary residence can get in with 3 percent down on a conventional loan or 3.5 percent on an FHA loan. A qualifying veteran may put nothing down. An investor buying a rental condo should expect 15 to 25 percent.
If You’ll Live in the Condo
Owner-occupants get the lowest minimums. Three loan programs do most of the work here.
FHA: 3.5 Percent Down
FHA loans allow 3.5 percent down with a credit score of 580 or higher. Scores between 500 and 579 still qualify but require 10 percent down. The catch for condo buyers is that the project itself has to be FHA-approved. You can check a building’s status through HUD’s condo search tool, and if it isn’t on the list, your lender can request approval for that specific project.1HUD. Condominiums
FHA underwriting also caps your total debt-to-income ratio at roughly 43 percent. All your monthly obligations, including the future mortgage payment and HOA dues, have to fit under that ceiling.
Conventional: 3 to 5 Percent Down
Fannie Mae’s 97 percent loan-to-value programs let qualified borrowers put 3 percent down. At least one borrower has to be a first-time buyer, and household income generally can’t exceed 80 percent of the area median.2Fannie Mae. 97% Loan to Value Options Most lenders want a credit score of at least 620 for a conventional condo loan.3Fannie Mae. Eligibility Matrix
If you don’t fit the first-time buyer or income rules, the floor usually rises to 5 percent down. That is still well below the 20 percent many buyers assume is required, and the slightly larger down payment often brings a better rate.
VA: Zero Down
Veterans, active-duty service members, and eligible surviving spouses can buy a condo with no down payment through a VA-backed loan. In exchange, there’s a one-time funding fee. For a first-time VA borrower putting less than 5 percent down, the fee is 2.15 percent of the loan amount; subsequent uses run 3.3 percent. The fee drops to 1.5 percent at 5 percent down and 1.25 percent at 10 percent down.4Veterans Affairs. VA Funding Fee and Loan Closing Costs The condo has to be on the VA’s approved project list, so confirm the building early.5Loan Guaranty Service. Condo Approval for Lenders Quick Reference Document
If It’s a Second Home or Rental
As soon as the condo isn’t your full-time home, the minimums jump. Lenders price in the fact that owners are more likely to walk away from a property they don’t live in.
A second home, meaning a vacation unit you occupy part of the year, needs at least 10 percent down under current Fannie Mae guidelines.3Fannie Mae. Eligibility Matrix The lender will check that the property makes sense as a true second residence rather than a disguised rental.
Investment properties sit at the top of the range. A single-unit rental condo requires 15 percent down. Multi-unit properties of two to four units require 25 percent.3Fannie Mae. Eligibility Matrix Underwriting will also look at the expected rental income, and you’ll be asked for tax returns, any existing leases, and bank statements showing cash reserves to cover vacancies.
Why the Building Can Override Your Loan
Here is what catches a lot of condo buyers off guard. Even if you personally qualify for a 3 percent down loan, the building can force you into 20 percent or more. The term for this is warrantability: whether the condo project meets Fannie Mae and Freddie Mac underwriting standards so your loan can be sold on the secondary market.6Fannie Mae. General Information on Project Standards A warrantable building gets normal loan options. A non-warrantable one does not.
Common reasons a project fails: too much of its square footage is commercial (more than 35 percent), one investor owns too many units, more than 15 percent of owners are 60 or more days behind on HOA dues, reserves are underfunded (less than 10 percent of assessment income going to replacement reserves), or there is active litigation against the association.7Fannie Mae. Ineligible Projects8Fannie Mae. Full Review Process
When a building is non-warrantable, low-down-payment programs disappear. Buyers typically need at least 20 percent down, interest rates run higher, and some lenders won’t finance those projects at all. Before you make an offer, ask the seller or the HOA management company for the association’s recent financial statements, the reserve study, and any disclosures about pending litigation or special assessments. Finding a warrantability problem after you’re under contract is one of the most common ways condo deals collapse.
Mortgage Insurance When You Put Down Less Than 20 Percent
Any conventional loan with less than 20 percent down requires private mortgage insurance. PMI protects the lender if you default, and it usually costs between 0.5 and 1.5 percent of the loan balance per year, billed monthly. On a $300,000 loan, that works out to roughly $125 to $375 a month on top of the mortgage payment and HOA dues.
PMI isn’t permanent. Under the Homeowners Protection Act, you can request cancellation once your loan balance reaches 80 percent of the home’s original purchase price. If you don’t ask, the lender has to terminate it automatically at 78 percent. You have to be current on payments either way.9Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance
Reaching 20 percent down also tends to simplify underwriting. For condos, where the warrantability review already adds complexity, a 20 percent down payment can be the difference between a clean closing and weeks of extra back-and-forth.
Cash You’ll Need Beyond the Down Payment
The down payment isn’t the only check you’ll write. First-time condo buyers are routinely caught short by the rest of the closing-day costs.
- Closing costs. Lender fees, title insurance, the appraisal, and prepaid property taxes and insurance usually add 2 to 5 percent of the loan amount. On a $300,000 mortgage, that’s $6,000 to $15,000.
- Capital contribution fee. Many associations charge new buyers a one-time fee, sometimes called a working capital fund or new-owner fee, usually equal to one to three months of HOA dues.
- Special assessments. If the building has a pending or recently approved assessment for a roof, elevator, or structural work, you could owe anywhere from a few hundred to tens of thousands of dollars shortly after closing. Ask for the past two years of HOA meeting minutes; that’s where upcoming assessments typically appear first.
Run the full math before you lock in a price range. On a $300,000 condo with 5 percent down, you’d bring the $15,000 down payment plus $6,000 to $15,000 in closing costs plus any association fees. Budgeting only for the down payment and then scrambling for the rest is where a lot of first condo purchases go sideways.