Yesterday I started a post with the name, "How to Finance a Condo" but was too angry to write on that subject.
A condo in a mixed use developement in Downtown St. Louis was having some problems and it both fueled my desire to call attention to the subject, but was really 'eating my lunch' so based on self-preservation, I stopped.
I'm not a lender and have always been leary of the practice of Realtors doubling as mortgage lenders. Just a personal oppinionn. What I can say is that there is a learning curve for a lender to know how to finance a condo and it doesn't seem to get enough attention some of the time.
How do I know if a lender is not qualified to finance a condo. That is a difficult question to answer, but also very easy. Difficult when a buyer first chooses to work with them, when a contract is first written. It is easy to tell when the financing begins to fall through, and they make glaringly obvious mistakes that jeapordize our mutual clients and their ability to buy.
One thing about lenders, is they practically all talk a good game in the beginning. This is not meant to take a shot at the true professionals out there, and I know you're out there. I've found that inexperienced or otherwise unqualified lenders will say what they have to say to gain a client regardless of whether they can help them or not. They also are really hard to tell whether they know what they are talking about. Actions speak louder than words.
In financing a single family house, the buyer must be qualified and the house must qualify (appraisal). In condos, another element, the condo association, (bylaws, declarations and budget) must also qualify. A good lender will qualify the association at close to the same time that they qualify a buyer. Why wouldn't they?? After all, if they can't qualify the building to work with one of their mortgage products, they out to be up front and back out of the deal before they waste too much of thier time, right? Inexperienced lenders often make the mistake of waiting until close to closing, or the financing contingency deadline (loan comittment date) before they look into whether the association qualifies.
Another mistake often made is to accept what the condo association manager describes as gospel. In my experience, a great deal of mistakes are made in completing these condo questoinaires, so the information provided on these reports should ALWAYS be substatiated if possible.
Lastly, try to make sure the lender is aware up front about prospective issues and their effect on being able (for them) to finance the condo. Letting them know that there are commercial interests within the association, whether the building is on the FHA list, whether the building has more than 50% non-owner occupied and if that information isn't known, making sure that the condo association is responsive to attempts to find that information. A good lender will take care of this, but a good realtor, these days, should also try to stay on top of things to ensure the deals aren't screwed up in the end.
There's nothing worse than finding out a few days before closing that a completely qualified borrower is being rejected because of the condo association and that problem wasn't resolved earlier in the contract period.
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