If a single-family home is out of your price range or you’re simply looking for a lower-maintenance property, condominiums can offer an ideal living situation. Many condo properties are also eligible for USDA financing, which can mean even more savings in the long run.
USDA loans require no down payment, come with affordable rates and have looser credit and income guidelines than traditional loan options. They’re available throughout the U.S. in designated rural areas.
Do condos qualify for USDA loans? Yes and no.
In order to qualify for USDA financing, a condo must first and foremost be located in a USDA-approved rural area of the country. You, as a buyer, must also meet certain income and debt-to-income guidelines to qualify.
In addition to this, the condominium must be listed on the approved condo list from either the Federal Housing Administration, Fannie Mae, Freddie Mac or the Department of Veterans Affairs. These are also considered USDA-approved condos.
The primary requirement is that the condominium is located on a rural site. To see if a specific condo you’re considering is USDA-eligible, use the Department of Agriculture’s tool at USDA.gov.
USDA-eligible condos must also be:
Timeshares, houseboat projects, condominium hotels, investment securities and community apartment projects are not eligible for USDA financing.
Condos that are a named party in current litigation or used for business operations are also ineligible. If owners are allowed to hold title to more than one unit, these condos also do not qualify for a USDA loan.
Getting approved for a USDA loan on a condo is largely similar to the USDA loan process on any other property type. The one difference is that the lender will need to perform an underwriting review of the condo to ensure it’s been approved by FHA/VA/Fannie Mae/Freddie Mae and that it’s in compliance with all USDA rural eligibility guidelines.
In order to show that a condo project meets all requirements, the lender will need to issue a certification stating such to the USDA. They also must keep the loan file available and accessible should the USDA request more information.
In cases where a condominium unit is governed by a Homeowner’s Association, all applicable HOA dues must be included in the buyer’s total debt-to-income ratio during underwriting.
This may be different than underwriting practices on traditional single-family homes and could your purchasing power and monthly mortgage costs.
Condominiums can offer qualified buyers a low-cost, often low-maintenance living situation. And with the availability of USDA financing on these properties, becoming a homeowner gets even easier.
To learn more about getting a USDA loan for condo properties or about USDA eligibility, contact a home loan specialist today.