Financing for condominiums can be tricky because so many issues can arise. We do have financing for “unwarrantable” condominiums, but the interest rate for such financing is substantially higher than the rates for Conventional or FHA financing.
To get Conventional or FHA Financing, here are the questions that need to be answered:
1. Is the Condo Complex FHA approved? If yes, FHA financing is the best option for buyers who lack large down payments (20% or more).
2. Is the Condo Complex Fannie Mae approved? Many buyers don’t realize that condo complexes need to be approved for conventional financing too. The exception is for complexes with 4 or fewer units.
3. 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. Also, we can finance unwarrantable units, as mentioned above.
4. What is the Owner Occupancy Rate? If the buyer is buying “owner occupied”, many lenders have no issue with owner occupancy ratios under 50%. But, investors, PMI users and FHA buyers all require owner occupancy ratios over 50%.
5. What percentage of owners are delinquent with HOA dues? The magic number is 15% at most lenders.
6. Does a single entity or person own more than 10% of the units in the complex? This “concentration rule” often precludes conventional financing.
7. What exactly are the 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.
8. Is the developer still in control of the HOA? This too is another issue that precludes conventional financing.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646