To buy a condo, you qualify for a mortgage, confirm the building itself qualifies for financing, review the association’s finances and rules, get board approval if the community requires it, and close on the unit. The path looks like any home purchase on the surface, but condos add a second layer of underwriting — the lender evaluates the condo project alongside you — and a governance layer that can slow or sink a deal that looked solid on paper. Knowing where those extra checkpoints sit saves weeks and prevents the kind of late-stage collapse that costs real money.
Qualify Yourself Financially First
Your credit score sets the floor. FHA-backed loans require a minimum score of 580 for the standard 3.5% down payment. Scores between 500 and 579 can still work with at least 10% down.1HUD.gov. FHA Single Family Housing Policy Handbook 4000.1 Conventional loans from private lenders typically ask for 620 or higher but may be more flexible elsewhere.
Lenders also run your debt-to-income ratio, comparing total monthly debt payments to gross monthly income. Conventional loans underwritten through Fannie Mae’s automated system cap at 50%. Manually underwritten conventional loans cap at 36%, with room up to 45% for borrowers with strong credit and cash reserves.2Fannie Mae. B3-6-02, Debt-to-Income Ratios FHA generally tops out at 43%, with exceptions to 50% when other factors compensate.
Here’s the piece first-time condo buyers routinely miss: your monthly association dues count toward that ratio, right alongside principal, interest, taxes, and insurance. A $400 assessment can push a borrower who would easily qualify for a comparable single-family home over the lender’s threshold. Run the numbers with dues included before you set your price range.
The Building Has to Qualify Too
This is where condo purchases diverge from buying a house. Lenders underwrite the entire condo project in addition to you. A building that fails to meet certain standards gets labeled “non-warrantable,” which either kills the deal or forces you into specialty financing at higher rates. You can be perfectly qualified and still get denied over something the association did or failed to do.
Warrantability Standards
Fannie Mae’s selling guide sets the benchmarks that most conventional lenders follow. The association’s annual budget must allocate at least 10% toward replacement reserves for major repairs and deferred maintenance.3Fannie Mae. Full Review Process For new or newly converted projects, at least 50% of units must be sold or under contract to owner-occupants or second-home buyers.4Fannie Mae. Full Review – Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects Buildings with high concentrations of investor-owned rentals read as instability to lenders.
Commercial space is another tripwire. If more than 35% of the building’s total square footage serves nonresidential purposes, including retail, office space, and even rental apartments or hotel units within the project, the project is ineligible for conventional financing.5Fannie Mae. Ineligible Projects Commercial parking garages are excluded from the calculation. If you’ve fallen for a loft in a mixed-use building with ground-floor retail, get the square footage breakdown before you write the offer.
Pending Lawsuits
Litigation against the association can make a project non-warrantable overnight. Cases involving structural safety or habitability render the entire building ineligible for Fannie Mae delivery. Even pre-litigation activity like mediation or arbitration triggers the same restrictions when formal litigation is expected to follow. Personal injury claims only count as minor matters when damages are known and the association’s insurance carrier has agreed to cover them. Construction defect lawsuits where the association is the plaintiff — suing a developer, say — are only considered minor if repairs have already been completed and the association isn’t counting on the recovery to stay solvent.
FHA Project Approval
If you’re using an FHA loan, the building itself typically needs to appear on HUD’s approved condominium project list. For condos in projects that aren’t approved, a single-unit approval route exists, but it’s limited: only 10 to 20% of units in any one unapproved project can receive FHA financing through this process.6HUD.gov. FHA Single-Unit Approval Required Documentation List The lender reviews a HUD questionnaire covering owner-occupancy rates, reserve balances, insurance, commercial space, and special assessments. Check a project’s FHA status before you tour.
Documents to Gather and Review
The Condo Questionnaire
Lenders use a standardized form — Fannie Mae Form 1076 or Freddie Mac Form 476 — to evaluate the building’s financial and operational health. The association or its management company fills it out, covering insurance policies, delinquent dues, pending litigation, reserve balances, and owner-occupancy percentages.7Freddie Mac. Condominium Project Questionnaire – Full Form Expect to pay the association $200 to $500 for it. Request it early. Management companies aren’t always quick, and a delayed questionnaire can stall your underwriting timeline for weeks.
The Resale Certificate
Before closing you should receive a resale certificate, sometimes called an estoppel certificate, from the association. It discloses the financial state of both the unit and the association: operating budget, reserve fund balances, outstanding loans, pending special assessments, and whether the current owner is behind on dues or has unpaid fines. It typically includes the governing documents and recent board meeting minutes. Most states require this disclosure, and statutory caps on what the association can charge for it vary. Reading the resale certificate carefully is your best defense against inheriting someone else’s unpaid obligations.
The Governing Documents
Every condo community operates under a hierarchy of documents, and skipping the review is one of the most expensive mistakes buyers make. The declaration, sometimes called CC&Rs, is the foundational document. It’s recorded with the county, creates the condominium as a legal entity, defines what counts as your unit versus common areas, and assigns each owner’s percentage interest. Your voting rights and your share of monthly assessments flow from that percentage.
The bylaws sit one level below and govern day-to-day operations: board size, quorum, elections, pet policies, rental restrictions. Below those are the rules and regulations adopted by the board over time — noise hours, parking assignments, move-in procedures. If a rule conflicts with the declaration, the declaration wins.
Pay close attention to any right of first refusal clause. Some associations reserve the right to match a purchase offer and buy the unit themselves on the same terms you’ve offered. The documents specify the response window. This rarely triggers in practice, but it can delay closing if the board takes its full allotted time.
HO-6 Insurance
Your lender will require an HO-6 policy, which covers the interior of your unit: drywall-in finishes, your personal belongings, built-in fixtures, and liability. The association carries a master policy on the building’s exterior and common areas, but that policy doesn’t protect your furniture, your kitchen renovation, or your personal liability. How much HO-6 coverage you need depends on what the master policy covers. A “bare walls” master covers only the building shell, leaving interior fixtures like cabinets and appliances to your HO-6. An “all-in” master covers the structure and original fixtures, so your HO-6 can focus on personal property and any improvements you’ve made.
Board Approval
Many condo associations require board approval before a sale can close. The process typically involves a written application, consent to a background check, and sometimes an in-person interview. Boards use this to verify you intend to follow community rules.
Federal law draws hard lines around what the board can consider. The Fair Housing Act prohibits refusing to sell or imposing different terms based on race, color, religion, sex, familial status, national origin, or disability.8Office of the Law Revision Counsel. 42 U.S. Code 3604 – Discrimination in the Sale or Rental of Housing A board can ask about your finances and your plans for the unit. It cannot ask about marital status, children, country of origin, or disability. A denial without a clear, documented financial or rule-compliance reason may be legally challengeable. Rejections dressed up as “lifestyle fit” are exactly what fair housing claims are made of.
Special Assessments: The Cost Most Buyers Overlook
Monthly dues cover routine expenses. When a building needs a major repair and the reserve fund falls short, the board can levy a special assessment, a one-time charge spread across all owners. Roof replacements, elevator overhauls, structural repairs, and natural disaster damage are common triggers. These can run into tens of thousands of dollars per unit and are usually non-negotiable once approved.
Several warning signs point to elevated risk. An association that hasn’t commissioned a recent reserve study is guessing about future costs. Visible deferred maintenance — deteriorating common areas, aging mechanical systems — signals that large expenses are coming. Insurance gaps or high deductibles mean disaster costs will land on owners directly. Many states require owner votes or set annual caps on special assessments, but the protections vary widely.
Use the resale certificate and condo questionnaire to evaluate this risk. Look at the reserve fund balance against the building’s age and condition. Check whether any special assessments have been proposed or discussed in recent board meeting minutes. During negotiations, some buyers successfully require the seller to cover a pending assessment or adjust the purchase price to reflect the risk.
Closing on the Unit
Once you have board approval and your loan is fully underwritten, closing follows a familiar sequence with a few condo-specific wrinkles.
Schedule a final walkthrough before closing day. Verify that agreed-upon repairs were completed, that appliances included in the sale are present and working, and that the unit is in the condition the contract described.
At closing you’ll sign the mortgage note, the deed, and the settlement statement, which itemizes every dollar changing hands. An escrow agent or title company coordinates the transfer of funds from your lender to the seller. Title company fees, including recording the deed with the county, are a standard closing cost to budget for.
Your lender will require a lender’s title insurance policy, which protects the lender’s interest if a title defect surfaces later. An owner’s title insurance policy is separate and protects your equity if someone later claims a prior interest in the property.9Consumer Financial Protection Bureau. What Is Owners Title Insurance Owner’s title insurance is optional in most situations but worth the one-time premium with condos, because title chains in condo buildings can be messier than single-family homes — the declaration, its amendments, and the lien history all factor in.
Ownership officially transfers when the deed is recorded. From that moment you’re responsible for monthly assessments, compliance with the governing documents, and your share of community financial obligations. Some associations charge a transfer fee or capital contribution when a unit changes hands. This is a one-time cost that varies by community and should be disclosed before closing. Ask during due diligence so it doesn’t surface as a surprise on your settlement statement.
What the Tax Code Does and Doesn’t Give You
Condo ownership comes with the same federal tax benefits as any other mortgaged home. You can deduct mortgage interest on up to $750,000 of home acquisition debt, a limit made permanent under the tax legislation signed in July 2025.10Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction For mortgages taken out before December 16, 2017, the higher $1 million limit still applies. Property taxes are deductible up to the $10,000 state and local tax cap.
Monthly association dues are not tax-deductible on a primary residence. Owners who use the condo as a rental can deduct dues as a business expense, but if you live there, dues are simply a cost of ownership with no tax benefit. Build that into your monthly comparison with single-family homes, because the dues come out of after-tax dollars and don’t reduce your taxable income.