Condominiums

Quick Takeaways

Condos can serve as an affordable homeownership option, particularly for first-time buyers, seniors, and families living in high-cost areas.
When purchasing a condo, be sure to include monthly condo fees in your mortgage calculations and budget for likely fee increases over time.
Ensure the condo building is approved for your financing type.

New to the condo market? Condominiums can serve as an affordable homeownership option, particularly for first-time buyers, seniors, and families living in high-cost areas. Learn helpful buying tips to make the most of this homeownership opportunity.

What am I buying? When you buy a condo, you own your individual unit while sharing ownership of common areas with other residents. Condos are operated by homeowners' associations (HOAs) that maintain these shared spaces, enforce community rules, and collect monthly condo fees to cover maintenance, operations, and building amenities.

Important factors to consider when purchasing a condo. When budgeting for your purchase, remember that HOA fees are likely to increase over time. Also confirm that the condo building is approved for the type of financing you plan to use (see Featured Links below). During the underwriting process, lenders will review both your financial information and the financial health of the condo association, including whether it has sufficient reserves. Recent changes following high-profile building failures have led to updated requirements from Fannie Mae and Freddie Mac that may affect condo transactions. Homebuyers should ask if the building has been inspected for structural issues and if there are looming special assessments.

Learn more. Expand your knowledge of condominiums through our list of curated websites. Get information from sources such as HUD, IREM, Fannie Mae and Freddie Mac.

See References for more information.

Featured

Featured Links

FHA Final Condo Rulepdf

NAR Assessment: FHA Final Condo Rule

Approval Checklist for Existing Condominium Projects

FHA Condo Lookup

VA Condo Approval

Condo Financing Guides

Fannie Mae Condominium Processes

Freddie Mac Condominium Processes

FHA Single Family Housing Policy Handbook - Condo Project Approvalpdf

FHA Condo Rule: Its Impact on REALTORS® and Consumers

video

September 27, 2019

Hear NAR staff discuss the long-awaited FHA Condo Rule and its impact on REALTORS® and consumers.

Advocacy

What is the fundamental issue?

Condominiums are a popular and often more affordable purchasing option, especially for for seniors and first-time homebuyers. Because condos are typically more affordable than single-family homes, they provide an opportunity for homebuyers struggling to enter a low-inventory market. While FHA implemented rule changes in 2019 that made it easier for buyers to use FHA loans for condominiums, current approval requirements continue to limit these affordable homeownership opportunities.

I am a real estate professional. What does this mean for my business?

The current FHA condominium rules create both opportunities and challenges for your condo-buying clients. While the 2019 rule changes expanded access through single-unit approval (also called "spot approval"), key restrictions remain: at least 50% owner-occupancy, adequate reserve funding (at least 10% of assessments), maximum 35% commercial space, and no more than 15% of units being delinquent on assessments. These requirements can limit financing options for your clients.

NAR Policy

Condominiums continue to be one of the most affordable homeownership option for many first-time buyers, small families, single people, and older Americans. NAR supports improving FHA's condominium rules to expand market opportunities for both buyers seeking affordable properties and homeowners looking to sell their units.

Opposition Arguments

Some argue that condominiums carry inherently higher risks than single-family homes due to shared ownership structures and potential for concentrated foreclosures affecting building values. They contend that rental units and investor ownership pose additional risks since renters and investors may not maintain properties as well as owner-occupants, supporting current occupancy and ownership restrictions to reduce federal risk exposure.

Legislative/Regulatory Status/Outlook

FHA implemented new condominium rules in 2019 that reduced owner-occupancy requirements for some properties, raised commercial space limits, and expanded single-unit approval processes. NAR continues advocating for FHA to revisit these policies to further expand inventory available to buyers with government-insured mortgages. Specifically, NAR advocates for: increasing allowable commercial space from the current 35% limit to enable buyers to take advantage of properties in higher opportunity and densely populated areas; decreasing the 50% owner-occupancy requirement and instead using financial solvency as the primary approval criterion; and increasing single investor ownership limits (currently one unit for buildings under 20 units, and 10% for larger buildings) as investors have entered the residential marketplace at faster rates.

NAR Committee

Federal Financing and Housing Policy Committee

References

NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.

Condos: The Basics

Pro Tips for How to Buy a Condo in 2024 (Bankrate, Jan. 12, 2024)

When touring condos, ask who is in charge of maintaining the day-to-day operations. You can direct questions such as who handles resident requests and community rules to the property management company itself. Consider doing your own research on the company’s reputation, as well — find out what other projects they manage, and talk to board members if possible to see if they are satisfied with the company’s services.

Condos: Everything You Need to Know (Rocket Mortgage, Dec. 21, 2023)

Condo owners are responsible for what goes on within their individual units, including maintenance and repairs. Beyond that, they’re required to pay regular fees to a condo association. Those fees contribute to the maintenance of the shared common areas, building amenities and the exterior of the complex.

An Introduction to Buying a Condominium (Investopedia, Dec. 8, 2023)

A condo in a highly desirable location with quality amenities will likely keep its worth and appreciate over time. Vacation condos can be excellent vehicles for earning money, especially if the rent you charge covers your mortgage and HOA fees. These fees must be paid and may go up every year. They cover the cost of caring for communal complex spaces and maintenance like landscaping and repairs.

3 Reasons to Buy a Condo – and 4 Reasons to Beware (U.S. News & World Report, Jul. 7, 2023)

If an expense can't be delayed – let's say a pipe burst and there isn't enough in the reserve to cover repairs – condo owners could be asked to pay an assessment, which can range from a minor pittance to thousands of dollars. These unexpected financial hits aren't pleasant, but unplanned expenses occur frequently with houses as well.

Should I Buy a Condo? The Pros and Cons (realtor.com®, Jan. 9, 2023)

Condominiums can be a good investment, especially if they allow you as a buyer to enter the real estate market. Qualifying for financing is much the same as getting a mortgage for a single-family home. If you are purchasing condos as investment properties, you should be able to find a lender as well.

Condo Buyer's Guide (Fannie Mae)

“Condos represent a community form of ownership. In addition to your monthly mortgage payment, local property taxes (in most areas), and insurance costs, you will pay a condo fee that may also be referred to as “homeowners’ association” (HOA) dues or fees.”

Home Owners Associations (HOAs) and Fees

What To Know About Condo Associations: Your Guide to Rules, Fees and Insurance (Rocket Mortgage, Mar. 17, 2024)

Similar to an HOA, your condo association will collect regular dues from you and other association members to cover basic operating expenses. These fees are known as common charges. How much you pay in monthly, quarterly or annual charges will depend on the location and size of your condominium complex and the amenities your association offers.

In addition to common charges, your association may occasionally need to collect a one-time fee called a special assessment for unexpected costs.

Condo Fees vs HOA Fees: Understanding the Difference (Rexera, Feb. 29, 2024)

Condo fees, maintenance fees, or strata fees (as they’re also known) are payments required by the Condominium Association. Each Condo Association is responsible for determining the condo fees that owners should pay. These fees are used to cover the costs associated with maintaining and improving shared spaces within the condominium complex.

Understanding Condo Fees Vs. HOA Fees: Differences and Similarities (Quicken Loans, Aug. 4, 2023)

Condo association fees typically cover amenities, including:
Landscaping and cosmetic maintenance
Condo amenities
Recycling collection and trash removal
A master insurance policy for the building
Building security
Parking lots

The Condo Market

Explaining the “Condominium Comeback” (Connect CRE, Mar. 7, 2024)

The experts explained that 2024 should be a good year for the condominium space, especially in the urban core.

Naughten said that cities will be the big winners in 2024, mainly because young professionals are showing a high degree of willingness to return. “The 27-year-old living with his parents can’t take the suburbs anymore,” he observed. “They want to be back for the social aspect and to be closer to work.”

Florida’s Condo Prices Are Falling as Cost of Insurance and HOA Fees Skyrocket (Redfin, Feb. 26, 2024)

In the Jacksonville metro, for instance, the median condo price declined roughly 7% year over year in January, sales declined 27%, and new listings increased 32%. The story is similar in Miami, where condo prices fell 3%, sales dropped 9% and new listings rose 27%.

Seattle Condo February 2024 Market Review (Seattle Condos and Lofts, Mar. 13, 2024)

The Seattle citywide condo median sales price rose 8.4% year-over-year (YOY) and 3.8% over the prior month to $558,000. All areas of the city exhibited YOY increases in February. And, several had double-digit jumps – Capitol Hill / Central (+19.9%), Northeast Seattle (+19.1%), Northwest Seattle (+19.0%), downtown / Belltown (+16.2%) and SoDo / Beacon Hill areas (+16.2%).

Many High-End Condos Slow to Sell (Crain’s Detroit Business, Jan. 15, 2024) E

High-end condo sales in Detroit remain slow to materialize, and for proof, look no further than the near-downtown penthouse unit listed last summer by the state's lieutenant governor.

Late last May, Michigan Lt. Gov. Garlin Gilchrist and his family opted to list for sale the 5,600-square-foot, four-bedroom Corktown condo owned since 2014 with an asking price of nearly $1.9 million. Flash forward to the new year and the condo remains up for grabs, and the asking price has dropped 10.5% to $1.7 million.

So it goes in Detroit's long-sluggish condo market, burdened with an oversupply of inventory.

Is That Condo Building Structurally Sound? (REALTOR® Magazine, Jul. 28, 2021)

“Urge buyers who identify or suspect red flags, either of a structural or a financial nature, to consult with a qualified expert before making a purchase.”

Loan Policies

How Does a Condo Mortgage Work? (U.S. News & World Report, Apr. 10, 2024)

"When buying a condo, homeowners must qualify for the principal, interest, taxes, insurance of the loan and the HOA/condo fee," says Wagner. "Condo fees can vary greatly from building to building, so it's important to understand what all is included in the fee before proceeding with the purchase. Often, when adding the condo fee to a borrower's debt-to-income ratio, their buying power is reduced when compared to a single-family home or townhouse."

Condo Mortgages: Differences, Requirements and Rates (Refi, Jan. 8, 2024)

To counterbalance larger down payments, condos tend to cost less than single-family homes, so your principal mortgage payment on a condo will likely be lower than it would be on a house. By shouldering a larger down payment during the purchase process, condo owners can enjoy far lower monthly and overall payments over the life of their mortgage.

Buy a Condo with a VA Loan (The Mortgage Reports, Jan. 1, 2024)

Does the VA allow condo spot approval?

No, unlike the FHA, the VA will not allow for individual condo units to be approved within a non-approved condo complex. To be eligible for a VA loan, the entire complex will need VA approval.

Fannie, Freddie Step Up Scrutiny for Condo Mortgages: Here’s What That Means for Buyers (Bankrate, Aug. 8, 2023)

Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the U.S. mortgage market, have made some temporary condo loan rules now permanent.
The guidelines, established in response to the Surfside, Florida, condo collapse, preclude unsafe communities from GSE financing.
The rules help protect buyers from obtaining a mortgage for an at-risk condo. For some, however, they could also limit loan options.

Condo Loans: Defined and Explained (Rocket Mortgage, Mar. 8, 2024)

The added risk factors of condo financing may come with higher interest rates. They’re available from the same lenders who finance homeowners purchasing single- or multifamily homes. If you’re shopping for condos, you may also consider other home options such as apartments.

VA Loan Guaranty (United States Department of Veterans Affairs)

“After registering with AccessVA, you will be able to work in the new Loan Guaranty site”

Related Websites

Community Associations Institute

“CAI provides information, education and resources to the homeowner volunteers who govern communities and the professionals who support them. CAI members include association board members and other homeowner leaders, community managers, association management firms and other professionals who provide products and services to associations.”

Condominiums (United States Department of Housing and Urban Development)

The Condominiums page allows users to search for FHA-approved condominium projects by location, name, or status. These properties are not for sale by the FHA. The search can be configured to find specific types of projects through the use of the pull-down menus and entry fields.

Living in a Housing Cooperative (National Association of Housing Cooperatives)

“As a democratic organization that follows the cooperative principles, cooperatives give you a voice in the operation of your cooperative. The rights and responsibilities of shareholders are outlined in the various cooperative documents, including the bylaws, occupancy agreement/proprietary lease, and articles of incorporation.”

Condo, Co-op, and Planned Unit Development (PUD) Eligibility (Fannie Mae)

“Step 1: Determine a Condo Project Review Type Step 2: Follow the Condo Project Review Type Requirements Step 3: Confirm the Condo Project Insurance Requirements”

Condominium Unit Mortgages (Freddie Mac)

“Who are Condominium Unit Mortgages for? Borrowers who want to purchase a qualifying condominium.”

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

The Complete Guide to Purchasing a Condo, Townhouse, or Apartment (eBook)

The Condominium Concept (eBook)

Condo Owner's Answer Book (eBook)

Financing Your Condo, Co-op, or Townhouse (eBook)

How to Buy a Condominium or Townhouse (eBook)

Make Money with Condominiums and Townhouses (eBook)

Tips & Traps When Buying A Condo, Co-Op, or Townhouse (eBook)

Your Dream Home: A Comprehensive Guide to Buying a House, Condo, or Co-op (eBook)

Books, Videos, Research Reports & More

As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.

Condos and Co-ops (Chicago, IL: Dearborn Real Estate Education, 2006) HD 1377 M48c

Everything You Need to Know Before Buying a Co-op, Condo, or Townhouse (New York, NY: AMACOM, 2006) HD 1341 R74

Condominiums: The Pros and Cons of Ownership (Port Orchard, WA: Windstorm Creative, 2005) HD 1377 L16

Make Money with Condominiums and Townhouses (Hoboken, NJ: John Wiley, 2003) HS 1377 E2

How to Invest in Condominiums: The Low-risk Option for Long-term Cash Flow (New York, NY: John Wiley & Sons, 2002) HD 1377 V81

The Condo and Co-op Handbook: A Comprehensive Guide to Buying and Owning a Condo or Co-op (New York, NY: Macmillan, USA, 1998) HD 1377 W86

How to Buy an Condominium or Townhome: with Sample Forms and Worksheets (Naperville, IL: Sourcebooks, 1997) HD 1377 Ir9

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The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.