If you’re looking for a low maintenance home that provides on-site amenities and is located close to shopping, dining and entertainment, you may be a good candidate for a condo or townhome. But, how big of a down payment do you need for a condo or townhome?
The good news is that financing a condo or townhome is similar to financing a single-family home. That means that down payments for a condo or townhome can range from 3.5 percent to 20 percent (or more).
The amount of your down payment depends on your unique financial situation, says Adam P. Smith, president and CEO of The Colorado Real Estate Finance Group in Englewood, Colo. Factors like your credit score and the type of loan you are using impact how big of a down payment you need.
Twenty percent down was the best option for Riley Adams, a CPA in New Orleans, in securing a conventional 30-year mortgage for his condo in 2014. “I would suggest putting as much down as you can afford, preferably above 15 percent, but closer to 20 percent or more if you can afford it,” he says. “Doing so would result in greater odds of receiving an approval on a conventional mortgage on a condo or a townhome.”
Getting a Loan for a Condo or Townhome
Many people believe that a 20 percent down payment is necessary to purchase a home – condo, townhome, single-family residence, or other type of dwelling – but that’s not the case.
Jennifer Okhovat, a Realtor with Compass in Los Angeles, says that down payment requirements differ for each lending institution, but with an FHA loan, buyers can put down as little as 3.5 percent to buy a condo or townhome. “There are a number of first-time homebuyer programs that lending institutions offer than can provide financial assistance to those who want to purchase a home, but who may not have the 20 percent down payment to do so.”
Conventional loans may require a higher down payment. However, your chances of being approved for financing may be higher with this type of loan because not all condo or townhome buildings are FHA, VA, Fannie Mae or Freddie Mac qualified. Some of these loan types, such as a VA loan, may not cover condo or townhome developments. So, it’s important to speak with your lender to see if your potential condo or townhome development is eligible with your financing options.
Unique Considerations for Financing a Condo or Townhome
Purchasing a condo or townhome comes with unique considerations. When purchasing a condo, it’s important to know that your lender will look at your finances and reviewing the condo association’s finances. Because people who own units in the building must pay condo association fees, these fees are included in the cost of your mortgage payments, impacting how big your down payment you need.
The amount of your down payment for your condo or townhome will depend on several factors, such as your credit score and what you can afford for a down payment. Other factors may affect how much you should put down, but generally a down payment for a condo or townhome is like what you’d put down for a single-family house. Talk with your lender and your builder or developer to determine the best option for your.
Patricia L. Garcia is an award-winning freelance journalist who has written for NewHomeSource, the Associated Press, New Mexico magazine and the Texas Bar Journal. When not writing, she can be found in the garden, battling weeds and high-desert heat.