CHICAGO CONDO FINANCING GUIDE
Buying a condo in Chicago is different from buying a single-family home
The lender reviews your income, credit, and down payment. The lender also reviews the condo building and homeowners association
You can be a well-qualified buyer and still run into a financing problem if the building does not meet the loan program’s requirements
WHY DOES THE BUILDING MATTER?
When you buy a condo, you own your individual unit and share responsibility for the building with the other owners
The lender reviews items such as:
The HOA budget and reserve funds
The building’s master insurance policy
Special assessments
Pending lawsuits
Major repairs or deferred maintenance
The number of units rented
Owners who are behind on HOA dues
Commercial space in the building
The building itself affects whether conventional or FHA financing is available
SMALL CONDO ASSOCIATIONS
Chicago has many two, three, and four-unit condo associations.
The questions change depending on the building
A small three-flat in Lakeview can be managed directly by the owners. A West Loop high-rise often has professional management, elevators, door staff, parking, and a large insurance policy
A vintage walk-up can have upcoming masonry, roof, plumbing, porch, or tuckpointing work
None of these building types is automatically a problem Each one requires a different review
These buildings often have low monthly dues because the owners handle many responsibilities themselves. They can also have smaller reserve accounts, less formal paperwork, or no professional management company
Before buying, understand:
How much money the association has saved
Whether owners pay major expenses as they arise
Whether large repairs are coming
Whether the insurance meets lender requirements
Whether the association maintains organized financial records
Low HOA dues look attractive, but they can also lead to large special assessments when the roof, masonry, porch, or another shared part of the building needs work.
FHA CONDO APPROVALS AND SPOT APPROVALS
A condo building does not always need full FHA project approval for a buyer to use FHA financing
FHA allows participating lenders to request a Single-Unit Approval, commonly called a spot approval, for one unit in an eligible condo project that is not already FHA-approved
The building still must meet FHA requirements The lender reviews the condo questionnaire, owner occupancy, financial condition, insurance, FHA concentration, and other project details
Spot approval is not automatic, and it does not work for every building. It gives FHA buyers another path when the entire association has not gone through full FHA approval
This is especially useful in Chicago, where many smaller or older condo associations have never applied for full FHA approval
BUILDING INSURANCE
The HOA’s master insurance policy covers the building Your individual condo policy generally covers your unit, personal property, liability, and certain interior items
The lender reviews the coverage amount, deductible, replacement-cost terms, liability protection, and other details.
Building insurance has become one of the most common causes of delays in condo financing. Getting the policy reviewed early helps prevent surprises after you are under contract.
BOTTOM LINE
Chicago condo financing works best when the lender reviews both you and the building early.
Before becoming attached to a unit, understand the HOA dues, property taxes, insurance, reserves, special assessments, and major building repairs.
SPECIAL ASSESSMENTS
A special assessment is an additional amount that owners pay for a building expense not covered by the normal HOA budget.
In Chicago, special assessments commonly involve:
Roofs
Masonry and Tuckpointing
Balconies
Elevators
Windows
Plumbing
Parking garages
Building insurance deductibles
Before making an offer, ask what the assessment covers, how much remains unpaid, whether the seller will pay it at closing, and whether additional work is being discussed
A special assessment is not always a reason to walk away. It can show that the building is properly addressing an important repair The concern is whether the work is affordable, properly funded, and completed without creating a financing issue.
YOUR REAL MONTHLY PAYMENT
Your monthly cost can include:
Mortgage principal and interest
Cook County property taxes
HOA dues
Condo insurance
Mortgage insurance
Parking fees
Special-assessment payments
A $400,000 condo with high taxes and $900 in monthly HOA dues can cost more each month than a higher-priced condo with lower taxes and dues.
For FHA buyers, ask whether the project is already FHAapproved or qualifies for a Single-Unit Approval.
A little extra work upfront can prevent a major financing problem after you are under contract
Do not compare condos by price alone.