A buyer in Bucks County found a condo she loved, got pre-approved for an FHA loan, and made an offer. Three weeks into the transaction, her lender came back with a problem: the condo complex wasn’t on FHA’s approved project list. Her loan was dead. The condo was still there. The seller was frustrated. The deal fell apart because of a list neither the buyer nor her agent knew existed.
How Condo Financing Works
Buying a condo is not the same as buying a single-family home, even when the loan amounts are identical. Lenders don’t just evaluate you as a borrower. They also evaluate the condominium project itself. For FHA, VA, and conventional loans, the condo association and the project’s financial health must meet specific requirements before the loan can be approved.
The key distinction is warrantable versus non-warrantable. A warrantable condo meets Fannie Mae and Freddie Mac guidelines, which means it can be financed with conventional loans at standard rates. A non-warrantable condo does not meet those guidelines, which pushes the buyer into portfolio lending, Non-QM products, or larger down payment requirements.
Requirements and Eligibility in Pennsylvania and Florida
FHA-approved condo projects: FHA maintains a list of approved condominium projects. To use an FHA loan, the condo complex must either be on that list or qualify for a spot approval. Spot approvals allow a single unit in an unapproved complex to be financed with FHA under certain conditions. Requirements include the project being primarily residential, owner-occupancy rates meeting minimums, the HOA being financially stable, and no pending litigation involving the association.
VA condo approval: VA maintains its own separate approved condo list. The project must be on the VA-approved list for a veteran to use a VA loan. Some projects are approved by VA but not FHA, and vice versa. VA approval can be pursued by the condo association if it isn’t already approved, but the process takes time. Buyers on a timeline should check the VA condo database before making an offer.
Conventional warrantability: For a condo to be warrantable under Fannie Mae/Freddie Mac guidelines, it generally must meet these thresholds: no single entity owns more than 10% of the units, owner-occupants make up at least 50% of the project (higher for some programs), the HOA delinquency rate on dues is below 15%, the project has adequate reserves, and there is no significant pending litigation. Florida has additional requirements in the wake of recent condo safety legislation, particularly around reserve funding and structural assessments.
Non-warrantable condos: If a project fails the warrantability test, buyers still have options. Portfolio lenders hold the loan on their own books rather than selling it to Fannie or Freddie, so they set their own approval criteria. Non-QM lenders also finance non-warrantable condos. The tradeoffs are higher interest rates, larger down payments typically ranging from 20-30%, and fewer lenders to choose from.
Benefits and Drawbacks
Benefits: Condos offer lower maintenance responsibility, amenities, and in many cases more affordable price points than single-family homes in the same market. In both Pennsylvania’s suburban markets and Florida’s coastal areas, condos are often the most accessible entry point into homeownership.
Drawbacks: Project approval requirements add a layer of complexity that doesn’t exist with single-family homes. A beautifully priced condo in an unapproved project may not be financeable with a standard loan. HOA financial health matters to your lender, even if it looks fine to you as a buyer. Florida condos face increased scrutiny and cost following structural safety legislation, which has affected HOA dues and reserve funding requirements statewide.
What Buyers Get Wrong About Condo Loans
Most buyers and many agents don’t check project approval status before making an offer. They assume that if they’re approved as a borrower, the loan will go through. The project approval is a separate track that can derail a deal completely, and the earlier you check, the more options you have to address it.
The second mistake is assuming all FHA-approved projects are also VA-approved. The databases are separate, maintained differently, and don’t always align. Veterans should specifically run the VA condo approval search, not rely on FHA status.
Florida buyers have an additional consideration: the state’s new condominium safety laws have led some associations to dramatically increase dues and special assessments to meet reserve funding requirements. This affects affordability and in some cases HOA financial ratios that lenders review during project approval. Buyers should ask for recent HOA meeting minutes and reserve study documentation before going under contract.
How Dynamic Funding Solutions Helps
Lena Polnet at Dynamic Funding Solutions works with condo buyers in both Pennsylvania and Florida and knows how to check project eligibility before the deal gets complicated. Whether you’re looking at an FHA-eligible project in Montgomery County, a VA purchase near a Florida military installation, or a non-warrantable condo that needs portfolio financing, the right lender conversation happens before the offer, not after.
- How do I know if a condo in Pennsylvania is FHA-approved?
- HUD maintains a searchable database of FHA-approved condominium projects at the HUD website. You search by location, project name, or zip code. If the project isn’t on the list, it may still be eligible for a spot approval, which allows a single unit to be financed with FHA under specific conditions. A loan officer familiar with condo approvals can assess eligibility quickly before you get too far into the process.
- What makes a Florida condo non-warrantable?
- A Florida condo can fail warrantability for several reasons: excessive investor concentration, HOA delinquency rates above 15%, pending litigation involving the association, inadequate reserves, or failure to meet post-Surfside structural assessment and reserve funding requirements under Florida’s condominium safety legislation. These issues are more common in Florida’s older coastal condo market and require portfolio or Non-QM financing rather than conventional loans.
- Can I use a VA loan to buy a condo in Florida or Pennsylvania?
- Yes, but only if the condo project is on VA’s approved list. VA maintains a separate database from FHA, and projects must meet VA’s own approval criteria. If the project isn’t currently VA-approved, the condo association can pursue approval, but that takes time. Veterans buying condos should check the VA condo approval database before making an offer to avoid timeline complications at closing.
Buying a condo in Pennsylvania or Florida? Call Lena Polnet at Dynamic Funding Solutions at (215) 364-7171 before you make your offer. Lena Polnet, NMLS #17225, will check project approval status and identify the right loan program for your situation before the clock starts running.