This question comes up constantly — and the answer matters more in California than in most states because of SB-326, the state’s exterior inspection law, which adds a layer of condo-specific financing complexity that didn’t exist a few years ago. I help buyers run both scenarios: condo and house. The financing is not dramatically different for warrantable condos, but there are situations where the condo route can get complicated fast. I’m Michael DiVita — DRE #01818285 | NMLS #323700, DiVita Home Finance, Tiburon, CA. Call me at (800) 239-1103.
The Core Difference: Two Underwriting Reviews for Condos
When you buy a single-family home, the lender reviews you — your income, credit, assets, and the property’s value. That’s it.
When you buy a condo, there are two separate underwriting reviews:
- Borrower review — exactly like a single-family home (your income, credit, assets)
- Condo project review — a detailed analysis of the entire building: HOA finances, reserve funds, owner-occupancy ratio, pending litigation, SB-326 inspection status, and more
The condo project review is the wildcard. A borrower with excellent credit and 20% down can still be denied because the building has HOA litigation or a depleted reserve fund — neither of which has anything to do with their personal finances.
Down Payment Requirements: Condo vs. House
| Loan Type | Single-Family Home | Warrantable Condo | Non-Warrantable Condo |
|---|---|---|---|
| Conventional | 3%–5% minimum | 3%–5% minimum | 10%–20% typically |
| FHA | 3.5% (580+ FICO) | 3.5% if FHA-approved building | Not available |
| VA | 0% for eligible veterans | 0% if VA-approved building | Not available |
| Jumbo | 10%–20% typical | 10%–20% typical | 20%–30% typical |
Interest Rates: Are Condos More Expensive to Finance?
For warrantable condos with standard financing, rates are typically the same as or very close to single-family home rates. Fannie Mae does add a small loan-level price adjustment (LLPA) for some condo loans, which may add 0.125%–0.25% to the rate depending on LTV and credit score.
Non-warrantable condos are a different story. Because these loans must go through portfolio or non-QM lenders, rates typically run 0.5%–1.0% higher than market conforming rates.
California’s SB-326: A Condo-Specific Complication
Houses don’t have to worry about SB-326. Condos in California do. This law requires HOAs of condo buildings with three or more stories to inspect all exterior elevated elements — balconies, decks, walkways, and stairways.
Buildings that haven’t completed their SB-326 inspection are increasingly being flagged by lenders. Some lenders now refuse to fund loans in non-compliant buildings, which can make financing difficult even for buyers with strong qualifications.
👉 Full SB-326 Condo Mortgage Guide →
HOA Factors That Affect Condo Financing
The HOA doesn’t exist for single-family homes. For condos, HOA health is as important as your personal credit profile. Lenders evaluate:
- Reserve fund level — Fannie Mae wants 10%+ of annual budget in reserves
- Delinquency rate — No more than 15% of owners delinquent on dues
- Litigation — Any active lawsuits can make the building non-warrantable
- Owner-occupancy — At least 50% of units must be owner-occupied for conventional
- Special assessments — Large upcoming assessments trigger additional lender review
FHA Loans: Houses Win Here
FHA financing is much simpler for single-family homes. Any house that passes FHA’s property standards qualifies — there’s no building-level approval process. For condos, the entire building must be on HUD’s FHA-approved condo list, or you need to use FHA’s “single-unit approval” process. In California, a large percentage of condo buildings are not FHA-approved, which eliminates this low-down-payment option for many buyers.
VA Loans: Similar Story
VA loans are an incredible benefit for veterans — but for condos, the building must be on the VA’s approved condo list. Not all California condo buildings are on the list. However, unlike FHA, the VA approval process can be initiated by the lender, and we’ve successfully gotten buildings approved for veteran buyers.
👉 If you’re a veteran buying a condo in California: our VA loan team can check building eligibility for free.
Speed to Close
Single-family homes generally close faster. The condo project review — including requesting the HOA questionnaire, reviewing financials, and getting lender approval — adds 5–10 days to the process compared to a house. For warrantable condos already in Fannie Mae’s CPM database, the difference shrinks significantly. Our typical condo close time is 21–28 days.
California Condo Markets Where Financing Is Most Complex
- San Francisco — Older buildings, TIC conversion condos, active HOA litigation is common
- Marin County — SB-326 exposure in 1970s–1980s buildings, some non-warrantable situations
- Los Angeles — Large inventory of investor-heavy buildings in DTLA and beachfront areas
- San Diego — Strong VA market, but building approval adds complexity for veteran buyers
Frequently Asked Questions
What makes a California condo “non-warrantable” for mortgage purposes?
A condo is non-warrantable when it doesn’t meet Fannie Mae or Freddie Mac project approval guidelines. Common reasons include: more than 50% of units are investor-owned (not owner-occupied), the HOA has active litigation against the developer or third parties, HOA reserves are below 10% of the annual budget, more than 15% of owners are delinquent on dues, a single entity owns more than 20% of the units, or an SB-326 inspection has found serious deficiencies. Non-warrantable condos require portfolio or non-QM financing, which typically adds 0.5%–1.0% to the rate and requires 10%–20% more down.
Is it worth buying a condo in California given the extra financing complexity?
For most warrantable condos in well-managed buildings, the financing complexity is minimal — it adds a few days to the process and potentially a small rate adjustment, but overall condos finance similarly to houses. The calculus changes with non-warrantable or SB-326-affected buildings. The key is checking building eligibility before you make an offer, not after you’re in contract. We run building checks for free before our clients make offers, which prevents financing surprises during escrow.
How do I know if a California condo is FHA or VA approved before making an offer?
FHA-approved condos are searchable in HUD’s online Condo Lookup tool using the building address or project ID. VA-approved condos appear in the VA’s Condo Lookup system. Neither database is always current — approvals expire and buildings may have been approved years ago but had their status lapse. Before making an offer that depends on FHA or VA financing, we verify current approval status directly and can initiate the building approval process for VA if the building isn’t currently listed.
Related Reading:
- California Condo Mortgage Guide 2026
- Non-Warrantable Condo Loans California
- SB-326 Condo Mortgage California
- Jumbo Loans California
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | Licensed since 2007. DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
