How is condo lending different ?
Has Condo lending let up? Is it still as hard to get a condo financed?
Yes, and it depends. We have closed more condos this year then we have the past 2 years combined – so yes, we are seeing an upward tick in condo lending.
Purchasing a condo is different than purchasing a detached single-family residence and here’s why: You have TWO sellers. The “HOA” (usually a LLC) that owns the outside of the building and land that it is built on and a “human being” seller that owns dry wall, appliances and everything inside the unit.
You not only have to approve the buyer, but the lender now has to approve the HOA as well.
This is a good thing!
Lenders did not do this before and look what happened. Now the HOA has to pass minimum requirements according to Fannie Mae, Freddie Mac, VA or FHA guidelines.
For FHA and VA loans the condo MUST be approved on the FHA or VA condo websites.
For conventional loans, there are very few condos that are currently approved by FNMA or Freddie Mac so most are a case-by-case approval process.
The links are listed below for you to review.
You can go as little as 3% down on a condo with conventional lending, subject to the HOA getting approved with full condo review.
Prepare your buyer and seller up front. Below are the documents we will need to get the approval process going. If the seller can have these documents included in the seller disclosures that would make things go much smoother and a quicker decision reached.
Be proactive and request a condo questionnaire from your lender to be filled out.
*If you do not have a preferred lender,
Team Wilson would love the opportunity to earn your business.
Documents we’ll request from HOA Management Company:
- · Questionnaire
- · Bylaws & declarations
- · Master Insurance Policy
- · Balance sheet w/n 90 days
- · Budget
Potential Deal Killers:
- * More than 15% of the units are 30 days past due on the HOA fees
- · On Investment Properties if 51% of the units are investment owners this may kill the deal. This does not apply to primary residence.
- · No single entity, other than units owned by developer still for sale, may own more than 10% of the units.
- * The current budget must show a line item for a 10% reserve account. For example $100k annual income means the reserve line item must have $10k allocated.
- · Allows for daily/nightly rentals and has a check-in desk.
- · The amenities such as a pool, clubhouse are under a recreation lease to another company.
- · Pending lawsuits against the developer/builder that have not been resolved. Although a slip and fall or minor law suit may be okay.
- · If the commercial space within the project is greater than 25%.
- · Property insurance for the total project is less than $80/sq. ft. The master policy needs to have enough coverage. If it doesn’t we will need an appraisal evaluation of the entire condo project. Insurance agent may already have this but has to been done w/n 3 yrs.
- Some Important Facts & Positives to know:
- · INVESTOR condos – up to 70% LTV in Florida can now take advantage of LIMITED REVIEW as long as the project in an eligible project.
- · 25% down on a primary residence condo = streamline condo review.
- · Try to obtain some documents from the seller during the inspections period to review. We ask for these documents b/c they are important. Your buyer should review them as well.