How to Buy a Condo With a Conventional Loan as a First-Time Buyer

The Quick Read: A conventional loan on a condo has two approvals: the borrower and the building. First-time buyers can often put as little as 3% down on a one-unit primary residence, subject to lender guidelines. The building still has to pass a project review before the loan can be sold to Fannie Mae or Freddie Mac. Ask the lender to check the building before paying for an inspection or appraisal.

What Is Different About Financing a Condo?

A condo loan is underwritten twice. The lender reviews you: income, assets, credit and debt. The lender also reviews the project. Fannie Mae says lenders must review the project while underwriting the loan, and that loans on units in a failing project can’t be sold to it until the underlying problems are fixed.

That second approval surprises many first-time buyers. A strong file and a clean unit don’t help if the building has a problem. Across the wholesale programs Lendmire places files with, the building is a common reason a “perfect” condo file stalls.

Lendmire’s conventional loan programs follow this two-part structure. Lendmire is a mortgage broker, so it arranges the loan through wholesale lenders rather than lending directly. Everything below is subject to lender guidelines and full file review, and none of it is a commitment to lend.

Key Terms Defined

Project review: The lender’s check of the condo building’s finances, legal status and physical condition, separate from your personal file.

Condo Project Manager (CPM): Fannie Mae’s free web tool that lenders use to see a project’s status and run a review.

Established project: A completed project, mostly sold to buyers, where unit owners control the HOA. Exact thresholds sit in the agency guides.

HOA dues: The monthly fee you pay the association. It is separate from your mortgage payment.

Mortgage insurance: Coverage the borrower pays for when putting down less than 20%. It protects the lender, not you.

How Is a Conventional Condo Loan Underwritten, Step by Step?

The process runs in a predictable order.

1. Borrower underwriting. The lender looks at income, assets, credit and debt-to-income. For a condo, the HOA dues are added to your monthly housing expense. Most wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total ratio ceiling of 50%.

2. Identify the building. Give the lender the project name and address early. Fannie Mae publishes a public Condo Status Finder, and lenders see more detail in CPM.

3. Project review. Fannie Mae’s main route is called a Full Review, and lenders use CPM for it. Statuses include “Certified by Lender” and “Unavailable.” An Unavailable project can’t have its loans sold to Fannie Mae.

4. Appraisal. The unit is appraised like any home, but the property must also meet the project standards.

5. HOA documents. The lender collects the project documents and keeps its review file. There’s no single official checklist, so expect requests for budgets, insurance evidence and similar items.

6. Closing. As a consumer mortgage, the loan carries a Loan Estimate and Closing Disclosure.

Freddie Mac reviews also have a shelf life. Under Freddie Mac’s guide, project reviews are tied to the note date, and the allowed review window differs for established and new projects. Delivery timing after the note date also matters, and the project review may have to be updated if that window is exceeded. A building that passed once isn’t automatically approved forever.

What Does the Lender Look For in the Building?

Fannie Mae’s published review feedback lists the recurring problem areas:

• Commercial or non-residential space
• Critical repairs
• Delinquent HOA dues and special assessments, flagged when more than 15% of units are 60 or more days past due
• Priority lien rules
• Inadequate reserves, meaning annual reserves under 10% of assessed income or no supporting reserve study
• Insurance, litigation and single-entity ownership

Treat those thresholds as reference points from older agency feedback, since the current Guide governs. For a buyer, the practical message is simple. Pending litigation, needed repairs, thin reserves or weak insurance can make a good-looking unit unfinanceable on a conventional loan.

Some project types are ineligible outright, including timeshare or fractional projects and condo hotels. New projects with excessive seller contributions are also ineligible.

How Much Down Payment Does a First-Time Buyer Need?

Often 3%. On a one-unit principal residence with a fixed rate, 97% LTV is available when at least one borrower is a first-time buyer. That means no ownership interest in a residence during the previous three years, per Fannie Mae’s 97% LTV FAQ. Otherwise, standard purchase leverage tops out at 95% LTV, or 5% down. These figures are program guidelines, not promises.

HomeReady is a separate path. It has no first-time-buyer requirement, but it carries an income limit of 80% of area median income, and it covers one-unit principal residences, including condo units. If every occupying borrower is a first-time buyer, expect at least one to take a homeownership course. Fannie Mae’s free HomeView course can satisfy that.

Mortgage insurance applies above 80% LTV. You can request cancellation at 80% of the original value, with good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%. Premiums depend on the borrower, so only a lender quote tells you the real number. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

If you plan to rent the unit out or use it as a second home, occupancy changes the leverage limits. Check that before choosing a program.

What Happens to HOA Dues in Your Budget?

Dues sit outside the mortgage payment but inside your budget. The CFPB notes that condo fees are usually paid directly to the association rather than to your loan servicer. It also says buyers should factor them in when deciding what they can afford, and that dues can vary widely, from modest amounts to quite substantial monthly charges.

Think in total monthly housing cost: loan payment, mortgage insurance if any, taxes, homeowners insurance and dues. Dues also count in your debt-to-income ratio. A high-dues building can lower the price you can afford, even when the price tag looks fine.

Where Does the General Rule Break?

Not every condo follows the standard path. These edge cases matter.

• Detached condo units. Fannie Mae can waive project review for units that share no walls, floors or ceilings with a neighbor. The project still can’t be “Unavailable.”
• Small projects. Freddie Mac’s guide lists “Exempt From Review” for 2-4 unit condo projects and for 5-10 unit projects not in a master association, with other conditions. Read the guide rather than assuming.
• Reciprocal review. Freddie Mac accepts projects that Fannie Mae has certified or approved, and established projects approved by FHA when the loan is conventional. A building approved under another program may still work.
• Streamlined review. Freddie Mac also lists a “Streamlined Review” for certain projects.
• New construction. A new project must be “substantially complete,” which means a certificate of occupancy has issued and all units and buildings in the legal phase are finished. Buyer-selected items such as appliances are excluded, but the lender must document they’re installed before closing.
• Status changes. Fannie Mae can move a project to Unavailable when it learns of non-compliance. A prior approval is not a permanent one.

If you’re also weighing government-backed options, Lendmire’s piece FHA vs Conventional Loan for a First-Time Condo Buyer: Appraisal Rules covers the appraisal and building rules side by side.

What If the Building Fails Review?

Then the loan can’t be sold to the agencies, and you have options, none painless. You can walk away. You can negotiate a contingency that protects your earnest money. You can ask whether the problem is fixable, since loans on a failing project can’t be sold until the underlying issues are corrected. Or you can ask whether the building qualifies through another route, such as a reciprocal review.

The cheaper move is to avoid this outcome. Before you pay for an inspection and appraisal, have your lender check the project’s status. A few minutes of screening can save you hundreds of dollars in fees on a deal that was never going to close.

Decision Table: Which Path Fits?

Common First-Time Condo Mistakes

• Budgeting on price alone and ignoring dues
• Shopping for a unit before telling the lender it’s a condo
• Skipping the HOA documents because the unit looks clean
• Assuming a building approved once is approved forever
• Waiting until after the appraisal to ask about the project

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Condo Status Finder

2. Fannie Mae Selling Guide: Full Review Process

3. Freddie Mac Guide 5701.2

4. Fannie Mae FAQs: 97% LTV Options

5. CFPB: Are condo or co-op fees included in my monthly mortgage payment?