Can You Refinance a Condo?
Can you refinance a condo? The short answer is yes — but keep in mind that even if you qualify as a borrower, your condo and its owner’s association must also qualify. This makes the process a little more complex than refinancing a single-family home.
If you and your condo community are eligible, refinancing your condo mortgage can be a great way to get a lower interest rate, change your loan term or convert some equity into cash. Whatever your reasons for refinancing, we’ll cover what to expect when it comes to condo refinance rates, condo loan options and what you’ll need to qualify.
Condo refinance rates
Condo refinances usually come with higher interest rates than condo purchase loans. Condo refinance rates are also higher than the refinance rates for single-family homes, typically by about 0.125 to 0.25 percentage points.
However, you may be able to avoid the rate hike associated with a condo loan by keeping your loan-to-value (LTV) ratio under 60% when you refinance.
How to refinance a condo vs. traditional mortgage
The process for refinancing a condo is very similar to refinancing a traditional home. You’ll still need to submit documentation proving that your finances and credit meet minimum requirements. The main difference is that there will be additional checks to vet the condo project and its condo owners association (COA).
Documents you’ll need may include:
| Personal financial documents | COA documents |
|---|---|
|
|
The exact requirements for condo refinance loans — those required for borrowers as well as for the condos themselves and their COAs — vary depending on your chosen loan program.
Below, we’ll cover common loan options and their basic borrower requirements. Then, we’ll move on to what’s required of the condo and COAs themselves.
Condo refinance loan options and borrower requirements
| Refinance program | Minimum credit score | Maximum LTV ratio | Maximum DTI ratio |
|---|---|---|---|
| Conventional rate-and-term refinance | 620 | 97% | 45% to 50% |
| Conventional cash-out refinance | 620 | 80% | 45% to 50% |
| FHA rate-and- term refinance | 580 | 97.75% | 43% |
| FHA cash-out refinance | 500 | 80% | 43% |
| FHA streamline refinance | None | None | None |
| VA rate-and-term refinance | No VA-set minimum, but lenders require 620+ | 100% | 41% |
| VA cash-out refinance | No VA-set minimum, but lenders require 620+ | 90% | 41% |
| VA IRRRL | None | None | None |
| USDA rate-and-term | None | The home’s new appraised value | None |
| USDA streamline | None | None | None |
Conventional condo loans
Guidelines set by: Fannie Mae and Freddie Mac
You can use a conventional loan to refinance a condominium with a minimum 620 credit score, a maximum 45% debt-to-income (DTI) ratio and cancelable private mortgage insurance (PMI).
Home equity required: 3% (rate-and-term refinances), 20% (cash-out refinances)
FHA condo loans
Guidelines set by: The Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD)
You’ll need at least a 500 to 580 credit score and a DTI under 43% to refinance a condo with an FHA loan — except if you purchased your condo with an FHA loan. In that case, you can refinance without any credit or DTI requirement using an FHA streamline refinance.
As with all FHA loans, you’ll have to live in the home (in this case, the condo) as your primary residence. You also may not borrow more than the FHA loan limit in your area.
Home equity required: 2.25% (rate-and-term refinances), 20% (cash-out refinances), no minimum (streamline refinances)
VA condo loans
Guidelines set by: U.S. Department of Veterans Affairs (VA)
Active-duty military service members, veterans and eligible spouses can refinance a condo with a VA loan. For military borrowers with full entitlement, this loan program has major perks including no mortgage insurance and no loan limits.
The VA doesn’t set a minimum credit requirement, so you can shop around for a VA lender with credit requirements that fit your needs or — if you already have a VA loan — use a VA interest rate reduction refinance loan (VA IRRRL) to refi with no credit check.
Home equity required: No minimum, but your LTV may not exceed 100% for rate-and-term refinances and may not exceed 90% for cash-out refinances. There’s no maximum LTV limit for borrowers using a VA IRRRL.
USDA condo loans
Guidelines set by: The U.S. Department of Agriculture (USDA)
The USDA offers mortgage loans to low-income borrowers in rural areas. There’s no minimum credit score requirement, but you’ll need to meet USDA income limits and demonstrate that you can handle the monthly mortgage payments.
You’ll also need to live in a USDA-designated rural area — you can use the USDA eligibility map to look up your area’s status.
Home equity required: No minimum, but your LTV may not exceed 100%.
Struggling to meet standard refinance requirements? Special refinance programs to know about
There are programs in place that may help homebuyers refinance more easily, including the Freddie Mac Refi Possible® and Fannie Mae RefiNow™ programs. As long as your income is within program limits, these options can help you refinance — even if your LTV and DTI ratio are too high to qualify for standard conventional loans. Borrowers with an LTV up to 97% and a DTI up to 65% can take advantage of these programs.
Condo and COA requirements by loan program
Conventional condo loans
Eligible condos must be “warrantable,” which just means that they follow Fannie and Freddie’s extensive rules for condo projects. These rules set out how a condo may be run.
For example, a warrantable condo may not:
- Have 20% or more of its units owned by a single entity
- Have a COA involved in unresolved litigation
- Have mandatory membership fees for amenities that aren’t owned by the association, such as golf courses or country clubs
- Have a timeshare, fractional or segmented ownership
- Be owned and operated as a hotel or motel
- Be incomplete with regard to its construction
- Include split-ownership arrangements
- Have units that allow owners to divide their unit into multiple smaller units
- Have units that are not actually real estate, such as houseboats or cabanas
- Be properties with additional business arrangements, such as a spa or health club
Read more about the conventional requirements for warrantable condos at Fannie Mae’s website.
FHA condo loans
Only FHA-approved condos are eligible for FHA refinance loans. Requirements include:
- The condo project must be complete and ready for occupancy
- The association must hold adequate insurance coverage equal to 100% of its replacement cost
- At least 50% of units must be owner-occupied
- No more than 35% of the space can be used for commercial purposes
- At least 10% of the association’s budget must be held in cash reserves
- At least 85% of unit owners must be current on their condo association dues
- No more than 50% of the units may be FHA-insured
- Associations must re-apply to be FHA-approved every three years
How to find eligible condos: Use HUD’s condominium search tool to find FHA-approved condos or look up a specific condo you’re interested in.
Can I get a new condo approved for an FHA loan?
If a condo project isn’t already approved, you can get it approved — but it won’t necessarily be a simple process. You can read more about how the review and approval process works at HUD’s website.
VA condo loans
Eligible condos must be VA-approved, and may not:
- Be “condo-hotels”
- Be primarily nonresidential
- Be out of compliance with zoning regulations
For the full details on the VA’s rules for condos, speak to a loan officer or check out the VA’s loan guide.
How to find eligible condos: The VA also has its own VA-approved condominium search tool.
USDA condo loans
Condos eligible for USDA loans must follow rules that are largely the same as conventional and FHA condos. However, there are some additional rules, including that the condo project must:
- Contain four or more units
- Have sold at least 70% of the units (for new builds)
- Have at least 75% of unit owners who are current on their COA dues or assessments
- Not subdivide or partition any condo unit without the approval of at least 51% of all condo owners in the project
To get the full details on USDA condo rules, you can read the USDA handbook or reach out to your loan officer.
How to find eligible condos: Check the USDA’s property eligibility tool to find qualifying condos near you.
Condo refinances: What to consider
Do you have enough equity?
Getting a new condo appraisal before refinancing can be important, since you usually need a minimum amount of home equity to refinance and your home equity amount is based on the condo’s value.
Will a refinance benefit you?
Ask yourself what specific benefit you want to get out of refinancing. Can you lower your interest rate and save money over time? Can you get a lower monthly payment? Do you want to pay off your loan in 15 instead of 30 years? You can use our refinance calculator to experiment with different scenarios and see if a refinance makes sense for you.
Do the benefits outweigh the costs of refinancing?
Whether a refinance can financially benefit you is one calculation — but whether that benefit is significant enough to merit going through the hassles and costs of refinancing is another. The latter is really how you should think about whether you should refinance. If you’re unsure how to evaluate this, you may want to speak with a HUD-approved housing counselor.
Can you improve your credit score?
Mortgage lenders tend to offer the best condo loan rates and terms to those with a 780 FICO Score or higher. LendingTree can help you check your credit score for free if you’re not sure where you stand.
If your score currently falls short of 780, taking time to improve your credit before you apply for a condo refinance could be worth it. Simple steps, such as paying bills on time and paying down debts, can give your credit score a boost.