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 financing
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.
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.
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.