It has been established, for as long back as my 25 year mortgage career goes, that if a condo has a high investor level, you were going to have a hard time getting a mortgage. The investor level of a condo is how many units of the total investors own. For example, if a condo has 100 units, and 60 are owned by investors to be rented out and 40 units are owned as primary residences, then the condo has a 60% investor level. Read the rest of this entry »
A Non-Warrantable Condo is not a new style of condo, it is a condominium that does not meet the minimum standards set by Fannie Mae and/or Freddie Mac. In other words, the condo cannot be warranted to meet Fannie/Freddie guidelines. Most lenders will want a condo to be warrantable to Fannie or Freddie so that the loan can be sold to Fannie or Freddie, especially now that most banks and mortgage lenders are only selling to Fannie Mae and Freddie Mac. If a condo is not able to be warranted to Fannie/Freddie guidelines, it is usually due to the fact that the condo has a high investor level. Lenders prefer to see that a condo has 51% or more owner occupants with no more than 49% rentals, and in actuality they really prefer 60% owner occupied, or higher. Read the rest of this entry »
No, there is no such thing as a “no questions asked” loan. But, believe it or not, there is something called “Limited Review” for Conforming (loans at $417,000 or less) condo loans, and it makes getting a condo loan “much” easier. Read the rest of this entry »
It used to be simple to get an FHA condo loan. Lenders could do an FHA “Spot Condo Approval”, which meant that the condo did not need to be on the FHA Approved Condo List, and all we lenders needed to do was verify that the condo met certain FHA requirements (51% owner occupancy, no litigation against the condo, no more than 10% of the unit owners behind in their condo fees, etc). Now the condo approval process is more centralized, and more complicated. Read the rest of this entry »
Getting a condo loan approved seems to get harder and harder each day. Below are the loan approval conditions I got on a recent loan submission for a condo purchase:
1. Buyer to get 20% HO6 dwelling coverage.
2. Statement from the property management company about the cleaning services in the condo’s budget. What type of cleaning services are they?
3. Statement from the appraiser on whether having no parking in the project has an effect on the value. Read the rest of this entry »
An HO-6 policy is the form used for a condominium insurance policy. This condo policy will provide for coverage on the interior walls, interior upgrades, and for personal property held within the dwelling.
How does this apply to mortgage finance? In 24 years of mortgage banking, I have never even heard of HO6 insurance. And that is because when underwriting a condo loan, the banks only cared to see that the dwelling was insured in case of damage. And in a condo, part of condo fees go towards the master umbrella policy, so the unit owner usually does not concern themselves with getting dwelling coverage, because the master policy covers the reconstruction of their unit. But now, banks have new HO6 rules. This changed in the middle of 2009. Read the rest of this entry »
Getting a mortgage to buy a condominium is getting more complicated. The best advice I can give you is to make sure you talk to an experienced mortgage professional BEFORE YOU WRITE A SALES CONTRACT. This applies not only to the market I cover most in Washington DC, Maryland and Virginia, but nationwide.
Checking with a lender beforehand ensures that the condo is able to be loaned on. You would be surprised how many condos cannot get financing, especially with Conventional mortgage insurance.
Below are some of the latest twists and rules that a bank or PMI company will be looking for: Read the rest of this entry »
Getting a mortgage for a condominium in the Washington DC area has gotten more difficult, as it has for condos in all areas.
An FHA condo loan is easier to get than a Conventional condo loan. There are many rules to remember when you want to buy a condo, but the basic ones to remember to ensure that you get a mortgage are below. For FHA loans:
-the condo building usually must be 5 units or more.
-the building must be at least 51% owner occupied (this is how many units are occupied by primary residents versus investor owned units).
-there can be no right of first refusal in the condo docs.
-the condo should be complete, with no additional phasing.
-no special assessments pending.
-no legal action against condo.
-the HOA must have been in control of the owners association for at least 1 year.
-at least 90% of the units are sold.
-no single entity owns more than 10% of the building.
-adequate insurance and reserve funds in the budget.
Getting a Conventional condo loan is similar to the above, except that you must usually have at least 60% owner occupancy (some banks requires 65% or even 70%).
When a home buyer wants to buy a condo, the bank will not only qualify the home buyer, but they are also qualifying the condominium. So there are more questions to ask when buying a condo, when you want to get a mortgage.