Mortgage approval has two halves: you (credit, income, assets) and the property, which buyers routinely forget. A borrower with excellent credit can still be turned down because the condo project fails the lender’s review, the co-op board says no, or the appraiser cannot find a comparable sale. Here is what lenders check on the property side, and what to ask before you write an offer.

First question: what kind of property is it?

“Single-family home” means a detached house on its own lot, and it is the simplest case for financing. Condominiums, townhouses inside a planned development, co-ops, two-to-four-unit buildings, manufactured homes, homes on leased land and mixed-use buildings each carry their own rules, and some lenders decline whole categories. Tell your loan officer at pre-approval exactly what you are buying. A townhouse can legally be a condominium; the deed and association documents, not the architecture, decide.

Condos: the project has to qualify, not just you

For a condo, the lender underwrites the whole project along with your loan. Fannie Mae will not buy loans in projects where commercial space exceeds 35% of the building, where a single owner holds more than a set share of the units (two units in a project of five to twenty, 20% of the units in larger projects), where the building operates like a hotel with a front desk or short-term rentals, where ownership is timeshare or fractional, or where there is pending litigation over safety, structural soundness or habitability. Unfunded repairs costing more than $10,000 per unit that are due within the next twelve months also disqualify a project.

For a full project review, lenders check that the association budget puts at least 10% of assessment income into replacement reserves, that no more than 15% of units are 60 or more days behind on dues, and, for new construction, that at least half the units are sold or under contract to owner-occupants or second-home buyers. A project counts as “established” once at least 90% of the units have been sold.

All of this comes from a standard condominium questionnaire (Fannie Mae Form 1076 / Freddie Mac Form 476) that your lender sends to the association: is the project complete, how are units split among owner-occupants, second-home buyers and investors, how large is the reserve fund and is there deferred maintenance, how many owners are 60 or more days delinquent, is the association in litigation, is there hotel or resort activity, do deed restrictions apply. Ask the listing agent for the association budget, the master insurance certificate and any recent special assessments before you make an offer; they signal early whether the project will pass. Monthly dues count in your debt-to-income ratio, so they reduce how much house you qualify for.

Co-ops: you are buying shares, and the board has a vote

In a cooperative, the corporation holds title to the building, including the apartments. What you buy is stock in that corporation plus a proprietary lease giving you the right to occupy your unit. Your financing is therefore a share loan secured by the stock and the lease, not a mortgage on real estate, and not every lender offers one. Lenders also want the co-op to sit in a market with demonstrated acceptance of this form of ownership, which limits co-op lending to the metros where co-ops are common. On top of the lender’s approval, the co-op board must approve you as a shareholder. Budget time for the board package and interview, and ask about subletting and financing rules early.

Manufactured homes: it has to be real property

A manufactured home is a dwelling built on a permanent chassis. To be financed with a standard mortgage, it must be attached to a permanent foundation, carry a HUD Data Plate and the red HUD certification label on each section (required on every manufactured home built after June 15, 1976), be at least 12 feet wide with at least 400 square feet of living area, and, critically, both the home and the land must be legally classified as real property under state law. A home on rented land, or one still titled as a vehicle, is personal property, and financing it means a chattel loan, not a mortgage. Manufactured is not the same as modular; ask your lender which category applies, because the financing differs.

Unusual homes: the appraisal problem

Lenders value a home mostly by comparable sales: recent transactions of similar properties nearby, adjusted for size, condition and features. A house that is much larger, much more expensive or simply stranger than everything around it — a converted barn, a dome, a mansion among modest ranches — gives the appraiser nothing to compare it to. When the appraisal comes in below the contract price, the lender lends on the lower number, and the buyer makes up the difference in cash, renegotiates or walks away. Some lenders will not finance a genuinely one-off structure at all.

Appraisal, inspection and assessment are three different things

  • The appraisal estimates market value for the lender, which generally requires one. It protects the lender from lending more than the home is worth.
  • The home inspection reports the home’s physical condition — roof, systems, structure — and it is for you, not the lender. The CFPB’s advice is that you generally need both, and that you should schedule the inspection as soon as possible after choosing a home.
  • The assessed value is what your local assessor uses to calculate property taxes. It often bears little relation to the appraisal.

Down payment, reserves and the property

The property type also shapes the money you need at closing. On a conventional loan, 20% down avoids private mortgage insurance regardless of property type; below that, some lenders and insurers apply stricter limits to condos, multi-unit buildings and manufactured homes than to a detached house. Gifts from relatives are allowed on a one-unit primary residence, but on a two-to-four-unit home or a second home with less than 20% down you must contribute at least 5% from your own funds, and gifts are not allowed on an investment property. Two-to-four-unit homes also require six months of the full housing payment in reserves on a conventional loan; a one-unit primary residence has no minimum. Our homebuying process guide walks the full sequence, and the 2026 mortgage document checklist covers the paperwork the property side adds.