Chicago condo loans come in several varieties, to fit the different situations borrowers have. There are two main groups based on condo project situation: warrantable condos and non-warrantable condos. And there are several types of loans, based on the two groups, the credit and employment history of the borrower and the use of the condo.
Don’t forget that condo loans, except for the condo part, behave just like the other Chicago mortgages.
Warrantable Chicago Condo Loans
Most Chicago condos are warrantable. That means they meet the rules of Fannie Mae, Freddie Mac, FHA or the VA. Meeting these rules means that loans for such condos are easier to get and have lower interest rates than loans for condos that do not meet these rules.
Conventional Condo Loans in Chicago
Most of the condo loans in Chicago are conventional. The FHA and VA condo loans form a small part only: the FHA ones because the FHA only insures condos in projects it approves of; the VA ones because there are not that many VA borrowers.
To make sure you’re dealing with a condo that’s a good candidate for a warrantable conventional loan, get the budget and the bylaws early. Well, get them to your broker or mortgage specialist.
FHA Condo Loans in Chicago
If you need an FHA loan to buy a Chicago area condo, check here to make sure it is approved. If the project your condo is in is not on the list, skip it. (Getting a unit spot-approved takes time, which sellers do not usually grant. In any case, if you insist on getting approval, make sure your lender or broker are willing and able to do it for you.)
Unwarrantable Chicago Condo Loans
Whether you’re dealing with a condotel (like the ones at the Aqua, 225 N. Columbus Drive in downtown Chicago), a condo project that’s got too much commercial space or too many investor-owned units, or for any other reason, you probably have options.
There are lenders that do not mind some variations. But you need to find the right one. Some don’t mind dealing with condotels but mind every other variation, for instance, while others can go to 100% investor-owned and 50% commercial space but mind every other thing that does not align with the warrantable condo requirements.
Be prepared to pay higher interest rates and, often, have bigger down payments.
Condo Loans By Type
It makes a difference whether you are buying a condo to live in, as your second home or as an investment. Many Chicago area condo associations do not like investors. Some do, but only a few.
For that reason, if you’re looking at buying one as an investment, make sure you find one that allows investors. No lender will give you an investment loan on a condo that cannot be rented.
Buying a condo as a second home does not presents the same challenges as buying it as your primary residence. The only difference is that you may have to qualify for it while paying mortgage on your primary residence.
Since there are many condo projects in Chicago and not all are run the same, it is best if you get your Chicago mortgage specialist the condo association budget and by-laws as soon as possible. (Yes, they will get them on their own once they get going. But you’re better off if you present those documents to them when you fill out your loan application.)