We frequently discuss Owner Occupancy ratio requirements for condos, but there are many other important considerations that need to be addressed up front. The below are questions we ask all buyers and Realtors who are considering a condo purchase. These are all questions that significantly affect condo financing and they need to be known up front before the HOA Cert. comes back:
1. Is the Condo Complex FHA approved? If we are not seeking FHA financing, this question is of course irrelevant.
2. Is the HOA involved in litigation? If yes, it is not the end of the world. Some lenders will ignore litigation if it is not major or structural, or if it involves buildings or units far removed from the subject unit.
3. What is the Owner Occupancy Rate in the complex? For owner occupied purchases, the owner occupancy rate can be under 50%.
4. What percentage of owners are delinquent with HOA dues? The number needs to be under 15% in most cases.
5. Does a single entity or person own more than 10% of the units in the complex? This “concentration rule” often precludes conventional financing.
6. What are the exact HOA dues? We need documentation to prove the exact number for two reasons: (1) Lenders require it; and (2) If debt ratios are tight, we need the exact number to avoid surprises.
7. Is the developer still in control of the HOA? This too is another issue that sometimes precludes conventional financing.
8. Is the building that contains the condo over four stories high? If so, how many stories is it? Some lenders have different rates/pricing for condo complexes over 4 or 10 stories.
9. Does the condo complex contain any “commercial” (usually retail), or “live/work” Loft space? This is another factor that affects the lending source we choose. Many lenders avoid “mixed use” and “live/work” complexes.
One more factor: Interest Rates are higher for condos with LTVs over 75%.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646