A New Home for a New Year

Posted on: 24 July 2018

Not every home buyer is in search of a traditional single-family house. Some buyers prefer to purchase a condominium to avoid the duties of outdoor maintenance. Other buyers see the potential in purchasing a property that can accommodate more than just one family. If you are seeking to finance a condominium or a multi-unit property, you will need to follow the set of mortgage guidelines applicable to that particular type of real estate.

The agencies that guarantee federally regulated mortgages have differing rules for different types of building structures. The loan amount limit for a condominium is generally the same as the limit for a detached single-family home. The differences in loan guidelines are due to variables such as how you plan to use the property, and whether you already have other existing mortgages.

Different Mortgage Guidelines

Loans directly guaranteed by the VA require you to live in the home. This rules out the use of a VA loan for an investment property. Unlike a VA mortgage, however, a loan directly guaranteed by the FHA may be for a home with up to four units. Instead of a house, most mortgage loan types allow the borrower to finance a condominium. With a condo, however, an additional application step is required.

Condominium Approval Requirement

There is an added risk to an agency that guarantees a condominium loan. The ongoing viability of a condominium project is largely dependent on the building's owner. To be approved for a federally regulated mortgage, the project within which a specific condo unit is located must meet certain standards. A typical requirement is that a minimum percentage of the condo units must be owner occupied, as opposed to being owned by investors. The agencies that guarantee home mortgages have online lookup tools to determine if a condo building is on their list of currently approved projects. If a condominium you are considering is not on the list, don't worry. Additional time is often required for a condominium purchase so that the lender can apply for specific project approval.

Conventional Mortgage Loan Options

With a conventional mortgage eligible for purchase by Fannie Mae or Freddie Mac, you may purchase a home with up to four units. According to the guidelines at the Fannie Mae eligibility matrix, the percentage of the purchase price required as a down payment increases as the number of units increases. The eligibility matrix specifies the maximum loan-to-value ratio for a new conventional mortgage.

Don't forget to consider properties for sale. Contact a real estate agent to ensure that you have complete access to the market of homes for sale.