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Gift of Equity; Condo’s Reserve Requirements; Townhouses

gift of equityHere are a few reminders:

Gift of Equity: When a relative buys a home from another relative (“relative” can be used very loosely), the buyer does not need any down payment funds. Buyers can obtain a “gift of equity” from the seller equal to 20% of the purchase price or more, and no down payment funds are needed.

HOA Reserves: Fannie and Freddie require condo complexes to have cash reserves equal to 10% of the total annual income of the complex + the master insurance deductible.

Loan officers and Realtors often focus on other condo issues and forget about reserve requirements.

Other condo requirements include: (1) Concentration Limits – one investor can’t own more than 10% of the units; (2) No litigation involving HOA, with exceptions; (3) HOA dues on time – no more than 15% of owners can be late; and (4) developer cannot still be in control of HOA, in most cases.

Final Reminder: Attached Townhouse/PUDs are exempt from these HOA requirements.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167