How to buy a condo with confidence
Get a conventional mortgage
Let’s assume you want to buy a $200,000 condo with a 30-year mortgage.
A conventional loan could require a down payment of as little as $10,500 or 5%.
You’d need to pay private mortgage insurance until your equity increases to 20%, which would take about eight years. With a credit score of 720 to 759, PMI would cost about $98 per month.
The average 30-year, fixed-rate loan costs just 4.33%, according to our most recent weekly survey of major lenders.
But condo financing costs a bit more than a mortgage on a single-family home (add about 0.125%) and is subject to risk-based pricing, says Joe Parsons, senior loan officer and owner of PFS Funding, a Dublin, Calif., mortgage bank.
Of course, the loan's interest rate and PMI are adjusted based on the borrower's credit score.
Despite their risk-based pricing, conventional loans are cheaper than FHA loans for everyone except borrowers with poor credit, who probably won’t qualify for a conventional loan anyway.