I really wished I had the option of LARGER TYPE when I do this blog today!
Condo's have become increasingly difficult to finance! Correct?? Here's why...and a few tips to make it easier!!
In the past, if a condo project did NOT qualify for conventional financing there was and STILL is a very good reason!
Have you ever been driving around on a weekend looking at properites and saw that a condo project had an exclusive agent representing the sales, or may even have AN OFFICE located there? There is a reason!
In addition, have you ever seen a sign from a LENDER stating something like....."Special Financing offered by Dewey Cheatum and HOW State Bank" ?? There is a reason!
If you are a Realtor reading this, have you ever had a perspective buyer turned DOWN due to a problem with the condo association? Do you know EXACTLY what that problem was?? Did the lender offer a suggestion or alternative?
Did you know that SOME condo's STILL QUALIFY for 100% financing WITHOUT MORTGAGE INSURANCE?
Most of these issues are derived from the dreaded "Condo Questionaire", and can be settled at the VERY BEGINNING of the transaction, and not at the end! The most likely culprits to "deal killing" with a condo are:
-
More than 10% of the units owned by one person, entity or company.
-
More than 10% of the units are rentals.
-
The condo assocation has not been turned over to the unit owners from the builder or devleloper.
-
Less than 75% have been sold, or in some case 50%, but that is another part of the blog.
Zoning, and additional phasing come into play, as well as Common Areas being complete!
In the past, if a condo project did NOT qualify under standard FANNIE MAE & FREDDIE MAC guidelines, the underwriter or lender would run their approval...and HOPE for a limited review! This was based on the caliber of the borrower, and basically THE FINDINGS report of the loan approval! WOW, what a difference today!
The reason there is a specific LENDER associated with a condo project, is because either the GOT THE PROJECT APPROVED AHEAD OF TIME, or, because the project does not meet standard guidelines, then they are keeping the loan "in house", until the project MEETS the guidelines! Then, they will either refinance the borrower, or sell the loan at that time! This is NOT GOOD FOR YOUR BUYERS PEOPLE! This is why:
1. They will have to put more money down than is really necessary.
2. They may NOT be able to refinance if PMI issues keep getting worse!
3. They pay higher than normal fees like additional points etc..
4. Sometimes they are STILL being put on ARM'S (adjustable rates), and/or balloons. YUCK!
This is all done to benefit the LENDER NOT THE CUSTOMER and keeps them in the portfolio!!
Well, what can be done?? Here are some quick tips for both Realtors & Lenders alike!
1. Get the CONDO QUESIONAIRE filled out right away.
2. If the Condo does not qualify for whatever reason, there IS A PROCESS in which to get the PROJECT APPROVED! There is a $500.00 fee, and there is an extensive "Punch List", but it can be done! I would ONLY recommend this if you plan on doing more than ONE loan within this project!
3. If doing only ONE LOAN, then you can get a SPOT APPROVAL from Fannie Mae! There is not a cost for this, but the LENDER/FUNDER must request this, and will need their SELLER SERVICER #. Important note: Not all Funders will do this! Wells Fargo was HAPPY to do it, but Countrywide & JP Morgan Chase Bank said, "sorry, not interested"...Hence, I have been using WELLS!! :)
4. 100% Financing IS AVAILABLE for Condo's through the USDA! Once again, you need to get the Condo questionaire filled out, but property address must also qualify!
Lastly, I recently closed a CONDO loan on with Lender Paid Mortgage Insurance! This is a fantastic product, as PMI begins to evaporate on Condo Loans as well as other properties! Ask your lender partner to explain it to you, or call or email me...and I will! I am ALWAYS looking for new business partners!
I always recommend investigating your options with CONDO'S very closely!
You need to be working with someone who has done plenty of condo loans, as well as stays on top of the changes in the industry! As always, my comments and tips, do not apply to EVERYONE! Credit Scores, Locations, Areas, Types of Projects, as well as caliber of borrower all come into play!
Good luck and feel free to email me, or call with ANY specific questions whatsoever!
"Your Lender for Life"
One Source Mortgage, LLC
608-592-2227
Another good one! Click below!
Comments(14)