Buying a condo is often the smartest entry point into California homeownership — but condo financing has rules most buyers never hear about until it’s too late.

Even with good credit and savings, your loan can fail because of the building, not you.

Here are the most common condo financing mistakes millennials make in California — explained simply, so you can stay in control.

1. Thinking “Pre-Approved” Means You’re Good to Go

A pre-approval checks you, not the condo.

The lender must also approve:

  • The HOA
  • The building’s finances
  • Insurance and reserves

➡️ A great buyer + a weak building = denied loan.

2. Ignoring the HOA Budget Until Escrow

Lenders want to see:

  • A current HOA budget
  • Healthy reserve funding
  • No major deficits

Older or poorly managed buildings often fail here.

3. Too Many Rentals in the Building

If too many units are rentals:

  • Financing options shrink
  • Rates and down payment requirements increase

Many California condos quietly exceed rental limits.

4. Surprise Special Assessments

Special assessments can:

  • Raise your monthly payment
  • Break your debt-to-income ratio
  • Signal bigger maintenance problems

Always ask why the assessment exists.

5. HOA Insurance Problems (Very Common Right Now)

Insurance is one of the top condo deal killers in California.

Lenders check:

  • Master hazard insurance
  • Liability coverage
  • Deductible limits

Missing or inadequate insurance = no loan.

6. HOA Lawsuits You Didn’t Know About

Some lawsuits are fine.
Unclear ones are not.

If the HOA can’t explain:

  • What the lawsuit is about
  • How it affects finances

Lenders will pause or walk.

7. Assuming FHA or VA Loans Are Automatic

FHA and VA loans require condo approval.

Common surprises:

  • Condo isn’t approved
  • HOA won’t cooperate
  • You’re forced to switch loan types late

8. Using a Lender Who Doesn’t Specialize in Condos

Condos are more complex than single-family homes.

If HOA docs aren’t reviewed early:

  • Problems surface late
  • Escrow extensions happen
  • Deals fall apart

9. Chasing the Lowest Rate Instead of the Right Loan

Some condos need:

  • Portfolio loans
  • Non-warrantable financing
  • Bigger down payments

The “cheapest” lender often isn’t the right lender.

10. Not Checking Whether the Condo Is Lender-Approved

Here’s something most buyers never hear:
Some condos are already flagged in lender systems before you ever make an offer.

Lenders use Fannie Mae’s Condo Project Manager (CPM) to track whether a building is financeable.

What that looks like in real life:

  • Approved: Usually financeable, but paperwork may still be needed
  • Needs Review: More HOA info required — timing matters
  • Not Eligible: Standard loans may not work; special financing may be required

Why this matters to you:
If this check isn’t done early, you may find out late that your loan options are limited — or gone entirely.

11. Thinking Agent Disclosures Are the Same as Lender Approval

The condo disclosures you get from a real estate agent are not the same as what a lender needs.

Lenders often require a Fannie Mae condo questionnaire (Form 1076) that digs deeper into:

  • HOA finances
  • Insurance coverage
  • Litigation and risk factors

Why this matters:

  • More transparency = fewer surprises
  • Better documentation = more loan options
  • Well-prepared condos attract more financed buyers — not just cash offers

Smart buyer move:
Ask whether a lender questionnaire is already available. If it is, you’re ahead of most buyers. Here is a copy whenever you need it.

https://singlefamily.fanniemae.com/media/15656/display

Bottom Line for Millennial Buyers

When you buy a condo, you’re buying into a building — financially, legally, and operationally.

The earlier your lender reviews the condo documents, the fewer surprises you’ll face.

🔎 BROKER’S EDGE – Smarter Real Estate Lending
🤝 Looking out for your Best Interest, and Helping Homeowners, Investors & Small Business Owners since 1990

📞 Steven Hook | Residential & Commercial Mortgage Broker

📱 415-260-9376 | 📠 415-449-3428

🎓 MBA | CMPS | CMA

👉 Schedule a Call
🌐 SanFranciscoLoanOptions.com
🌐 shook@Uamco.com or smhloans007@gmail.com

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This content is provided for informational purposes only and is not a loan commitment or guarantee of financing. Loan programs, rates, terms, and conditions are subject to change and borrower qualification. Individual results may vary.

Posted in blog, First Time Real Estate Buyers