A Few Things to Know When It Comes to Condo Financing

condo-palm-trees-planeFannie Mae recently loosened their condo guidelines.

So, we thought this was a good excuse to share a few condo reminders:


1. Concentration Rule. No single entity can own over 20% of the units in the complex. It used to be limited to 10%.

2. Commercial Use. No more than 35% of the square footage of the entire complex can be “commercial.” The previous limit was 25%.

3. Investment Properties Subject to “Limited Review.” This is new too, as investment condos formerly required “Full Reviews.”

  • A. Limited Review means only the condo’s insurance policy is required, and no questions regarding HOA delinquencies, budgets, etc.

4. Owner Occupancy Ratios. Owner Occupancy is irrelevant if a buyer intends to occupy the unit. It must be over 50%, however, if the buyer is an investor.

5. Rates Are Higher. Condo financing has higher interest rate if the LTV is over 75%.

6. HOA Delinquencies. No more than 15% of the units can be more than 60 days delinquent with HOA dues. This is a non-issue now, but it surfaces constantly after “corrections.”

7. Litigation. Litigation involving the HOA is usually a deal-killer, but not always if it is minor or doesn’t affect the subject unit. We need to review it. We can also use a non-Fannie or non-QM lender, but the rate will be higher and so will the down payment requirement.

8. FHA Approval. Entire condo complexes need to be FHA approved before FHA financing can be used to finance a unit. You can check to see if a condo complex is approved here.

9. 3% Down. This is a reminder that we offer 3% down financing for condos all the way up to $679,650 in “high cost” areas. This is a great alternative to FHA financing but guidelines are much stricter.

10. Is it a Condo? I am adding this b/c you can’t tell simply by looking at a unit. You need to check the zoning. If the unit does not touch the ground it is very likely a condo. But if it does touch the ground, it could either be a PUD/townhome or a condo. PUD/townhomes are subject to none of the condo restrictions.

11. HOA Dues. Lenders need to know exactly what they are b/c they are much higher nowadays than in the past and they significantly affect qualifications.

12. Two to Four Unit Complexes No Longer Require Project Reviews. This too is new, and it just means that is it much easier to get financing for small complexes now.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646