Low Down-payment Financing for Townhomes

Since the "great recession," getting a low down payment loan for a condo — FHA or otherwise — can be a challenge for buyers who want to move into a complex recorded as a "condominium" as opposed to a "Planned Unit Development" (PUD). However, it’s not impossible. Knowing your own finances and researching the condo complex and Condo Homeowners Association will help you find a condo or town home you can still purchase with a low down payment.

Borrower qualifications
Every loan requires different qualifications for a borrower, even folks who are borrowing money to buy a condo. In addition to the typically required excellent credit and steady employment, many borrowers of complex recorded as a condominium may be required to put a 10 percent or even a 25 percent or higher down payment unless the complex is currently approved for low down payment financing.

Condo Homeowners Association

One of the hurdles to buying a condo is that it’s not only your personal qualifications the lender will look at, but also the qualifications of the condo association. According to Investopedia, for a complex to be approved for FHA or low-down conventional financing, it requires conditions such as:

• More than 50 percent of the condos must be owner-occupied.
• No one can own more than 10 percent of the total units.
• At least 85 percent of owners must be current on their dues.
• If the condo complex is more than a year old, all the planned amenities must be in place.
• Borrowers who make a down payment that is less than 25% will pay either an extra 0.75% of the loan amount at the closing or an interest rate that is approximately 0.25% higher.

Lenders also make sure the Condo Homeowners Association itself is in good shape by looking for the following:

• Sufficient building and liability insurance
• Adequate budget reserves
• No pending litigation that could result in costly legal fees and lawsuits
• No anticipated special assessments (for roofs, parking lots, etc.)

Other Options

If those situations aren’t met, the condo complex is labeled “non-warrantable,” but that doesn’t mean all hope is lost. It does mean you’ll likely have to pay cash for the property or obtain a different type of loan.

Provo Townhomes Approved as Planned Unit Developments (PUD)

• Alpine Brook
• Arlington
• Canyon Brook Townhomes
• Deerhaven
• Eagle RidgeEastgate
• Franklin Commons
• Georgetown
• Highland Park
• Independence Ave
• Lone Tree
• Marrcrest
• Mokal Park Place
• Park Ridge
• Pioneer
• Riderwood
• Sunset
• Villages at Quail Valley
• Westbridge
• Westgate