Five tips to getting a mortgage for a condo
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By Scott Sheldon  March 14, 2014 12:00 am

Condominiums make an affordable alternative to purchasing a single-family home. As prices continue to rise in Sonoma County, purchasing a lower-priced condo makes for an attractive choice in pursuing home ownership.


Quick terms

• PITI (principal, interest, taxes and insurance): This is also your total mortgage payment, which includes the carrying costs associated with owning a home.


• HOA (homeowners association), commonly referred to the monthly homeowners’ association payment: Can be anywhere from $80-$500 per month, varies from home to home.


• PMI (private mortgage insurance): This is required when buying a property with less than 20 percent down this is also factored into the total PITI as is the homeowners’ association payment.


Tip 1 – Understanding a 

homeowners’ association

A homeowners association is a legal entity, a governing body made up of the board of directors, which controls the budget of the complex and/or the community in which the property is located. The association has specific property characteristics creating uniformity amongst the units within the community or the complex in which the HOA oversees. This is why condominiums typically look similar to each other, much like an apartment because each individual unit owner is responsible for paying the monthly HOA payment, which takes cares of ensuring the complex standardization.


Tip 2 – Condo versus

single-family home

Take a condo priced at $200,000 and a single-family house priced at $300,000 using a 30-year fixed-rate mortgage at 4.375 percent, assuming the down payment is $20,000.

• Condo: price, $200,000; loan amount, $180,000; principal and interest, $898; property taxes, (based at 1.25 percent of sales price) $208; hazard insurance $20; HOA payment, $400; PMI payment, $90; and the total is $1,616 per month.


• Single-family home: price $300,000; loan amount, $280,000; principal and interest $1,397; property taxes based at 1.25 percent of sales price, $312; hazard insurance, $60; 

PMI, $140; and the total is $1,909 per month.


Tip 3 – Know effect of 

HOA on buying power

In exchange for $100,000 in buying power, that translates to a monthly payment difference of $293 per month. In this example, that’s 73 percent of the homeowner’s association payment.

The most important of the factor in deciding to buy a condo is knowing how much the HOA payment has on your ability to buy in terms of sales price. The higher the HOA payment, the lower the sales price, higher the sales price lower the HOA payment.

Because of the weight on buying ability a homeowners’ association payment has, it would actually cost more on a monthly basis for a condominium than a single-family given the same sales price. Because unlike the house, the homeowners’ association payment is an additional fixed carrying cost that falls off or goes away like an ancillary fee can, such as PMI can (upon accumulating 20 percent equity).


Tip 4 – Condo loans 

may cost you more

Condos, because of their specific rules and regulations with adherence guidelines, always have the chance of opposition from a disgruntled homeowner. It is quite common associations have ongoing litigation issues from disgruntled homeowners, which can potentially make buying a unit in that complex problematic.

The key is to make sure the property is lendable and that there is no warranty issues associated with the complex. Additional warranty concerns the lenders might have could involve the complex being unwarrantable to Fannie Mae or Freddie Mac, meaning undeliverable to either agency due to unfinished units and costly litigation stemming from other parties. Your real estate agent could be best source for finding out up front whether the property you’re looking at is lendable or not (usually in listing descriptions).


Tip 5 – Is the 

property a PUD?

Some condos are actually planned unit developed (PUD), which are a cross between a condo and single-family home. PUDs have almost identical HOA ownership. PUDs have three unique attributes that make them a strong alternative choice.

1. HOA payments are usually much lower.

2. PUDs do not need FHA approval from HUD the way a condo does (akin to financing a single-family house) meaning the down payment is as little as 3.5 percent.

3. Can be large and mirror a single-family home and are often built into planned communities than involve communal benefits like a pool or a family park. Sonoma County to date has no mortgage HUD approved condominium projects, meaning an FHA loan can be used on the PUD property.

Buyers would stand to benefit pursuing condo homeownership if condos are priced significantly lower than single-family homes, such as in Sonoma County. Buying a condo can be a reasonable starter option for accumulating home equity and upgrading later on.


Scott Sheldon is a local mortgage lender, with over six years of experience helping people purchase and refinance primary residences, second homes and investment properties. Visit him at

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