Are you looking at the right things when buying a condo? Most people look at location, view, amenities, square footage, and level of finish inside the condo unit. But why get excited over a condo and put in an offer if the building is not able to be financed by a mortgage lender? Below is a list of some of the most important things that a lender will be looking for when analyzing a condo to approve a loan for a mortgage borrower.
Blog Category: Condo
Condo financing can be tricky, but with small 2 to 4 unit condos it has gotten easier. In some urban markets a multifamily home is converted to condominiums. For example, a duplex is turned into two condominium units. Or a triplex is turned into three condominium units. Or a fourplex is turned into four condominium units.
Condominium litigation can be a problem when getting a mortgage. What if a condominium has litigation against it and you want to buy it? To get a loan approved there are certain things a mortgage lender has to document or the loan may be denied.
A mortgage lender has to prove that the litigation has no impact on the safety and structural soundness of the condo.
And the insurance carrier that insures the condominium building is involved. They have to have agreed to provide the defense, and the amount of the litigation must be covered by the HOA’s insurance.
There are other reasons why litigation against a condominium may not be an issue. These may be:
- It is non-monetary litigation including, but not limited to neighbor disputes or rights of quiet enjoyment;
- the HOA is the plaintiff in the litigation and not the defendant;
- the reasonably anticipated or known damages and legal expenses are not expected to exceed 10% of the project’s funded reserves.
Financing a condominium can be tricky for other reasons. Mortgage guidelines have the ability to change at any time. Always talk to a well-reviewed mortgage loan officer. Make sure you understand the current guidelines and how they might apply to you.
Getting a condo loan gets harder? 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.
**Condo underwriting guidelines can change at any time**
Condo loan rules are important! And getting a condo loan has gotten a bit easier with some recent changes that Fannie Mae just made. The best thing you can do is make sure you know which loan rules to look at when buying a condo. It is even more important if you are selling one. Know all the exact details of your condo and how it is run. Then you will know if your buyers are eligible for Fannie Mae/Freddie Mac financing. If not, then you need to let prospective buyers know that they can look for something like a “portfolio loan”. These have more liberal rules than Fannie and Freddie. Condos that have major issues going on that may require a seller to find a cash buyer.
A limited review condo approval means that when you get a mortgage to purchase a condominium you don’t have to go through the normal extensive document review to approve the condominium. You must have an approved condo to get a mortgage approved to buy a unit in the building. The approval review is more limited/abbreviated with a limited review condo approval.
There are new 2022 condo mortgage guidelines. There have been several announcements regarding condominium deferred maintenance recently by Fannie Mae and Freddie Mac. We also have to pay attention to guideline changes announced by the various banks that we sell loans to.
Ever since the horrific disaster in Surfside Florida on June 24th 2021 the government agencies and the banks we sell mortgages to have started to incorporate questions related to condominium maintenance into the condo questionnaire. When the building collapsed due to deferred maintenance, it cost people lives and changed condo mortgage guidelines!
When buying a condo, you may find yourself in a competitive bidding situation. And your realtor may ask you about waiving some or all the contingencies in your contract. These contingencies are usually things like a home inspection contingency, appraisal contingency, and financing contingency. But waiving contract contingencies on a condo can be risky.