Special offer

Navigating the troubled waters around CONDO'S! Facts and Tips!

Mortgage and Lending with Funky Quail Vintage

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:

  1. More than 10% of the units owned by one person, entity or company.
  2. More than 10% of the units are rentals.
  3. The condo assocation has not been turned over to the unit owners from the builder or devleloper.
  4. 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



Another good one!  Click below!


Libby Offnick
RE/MAX Executive Realty - Mooresville, NC

Daran.....great info.  I am working on a project in Charlotte with these exact issues.  It would be helpful if listing agents got this info upfront so to avoid problems when financing is going to be an issue.



Apr 14, 2009 12:13 PM
Pat Fenn
Marketing Specialist for CJ Realty Group/Cindy Jones Broker - Springfield, VA

My "boss" has an entire new condo building she is selling.  She just hit 51% on sales but each deal has had an issue or two.  There seems to be a light at the end of the tunnel which is helpful as sales have been brisk recently.

Apr 14, 2009 12:14 PM
Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~ yesmyrealtor@gmail.com

That is great information.  I would stay away from any new condo projects in metro Detroit.

Apr 14, 2009 12:28 PM
Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

I'm in CA and in our lower end of the market for condo resales in urban areas is stymied by the loan guidelines requiring 51% owner occupancy, less that 15% delinquencies, more than 10% cash resserves.

Apr 14, 2009 12:33 PM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Hi everyone!

Libby-  Other good tips would be to HAVE ON HAND the Ins Agents name & phone#, and explain to them that lenders are going to be CALLING THEM to add individual owners to the policy!  This doesnt ALWAYS HAPPEN, but may...also, very good to have the name of the person, email, and phone# handy that fills OUT the condo forms!  Thanks for the nice comments! 

Pat-  I HIGHLY recommend having your "boss" :) PAY THE $500.00  and getting the project approved!  This is also a PLUS for BUYERS of the project, because it will be a selling "feature" for them down the road!   Thanks for leaving the comments!@  Greatly appreciated!

Russ- I sort of live in the CONDO capital of the world here near Madison Wisconsin!  Unfortunately, I have learned by experience!   If you EVER have a condo question, send it to me! I will get back to you pronto!   Thanks a ton for leaving a comment!  I LOVE comments from long time Rainers!!!

happy selling!


Apr 14, 2009 12:36 PM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Hey there Vickie!

Yep, we are seeing issues here too...again tho...Fannie MAE MAY (no Pun intended) still turn the project down...but it is WORTH a try to get this turned around!  If I were a developer or builder, I would ALWAYS get my project approved first & foremost!  The other two items, the reserves and delinquencies, we have not run in to...but, you know...different areas of the country always seem to have different issues dont they??  Thanks SO much for leaving a comment!  If there is anything I can ever do to help...please ask!


Apr 14, 2009 12:38 PM
Matt Heisler
Heisler & Mattson Properties - Southborough, MA
Real Estate & Investor Services

So much to remember!  I'm glad it's here in print so I don't have to.

Apr 14, 2009 12:42 PM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Thanks Matt!  Yes, another commentor Vickie, also added something that I didnt mention...as it hasnt been an issue HERE yet...but I should mention that if ANYONE wanted a copy of the actual form we have to get filled out...Ill be happy to email  you a copy directly!  It is amazing all the outs the funding sources have!   Thanks...and let me know if I can help!  Appreciate the comments!


Apr 14, 2009 12:48 PM
Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience

Do they approve just the 'spot' or the whole unit?




Apr 14, 2009 12:52 PM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Mr. Burris,

I can see it now, "Dallas fires head coach, after opening the season 0-8!"

Yes, readers...Tom is a "top dog" lender, just must be starting early today!

A "Spot Approval", is a one unit, one customer approval...one time only!

Theoretically, you could also get a "spot approval" from another lender for another customer, and once again, stresses the importance of BROKERS in this industry! 

Thanks for commenting!  :)


Apr 14, 2009 12:56 PM
Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

Hey D-Money!

Great post and don't forget the old standby FHA. Spot approvals are very similar and although they will need a little down it sure beats conventional financing!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Apr 14, 2009 01:13 PM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Darin...this is such a great blog.  I really think that the condo Q can meke or break a deal...not only for conforming loans, but also for FHA new construction.  I had a deal 2 weeks ago in where the borrowers really wanted a condo.  I told them that I'd only do it if I could get the Q-aire filled out immediately so that we could kill the deal right away if it was a bad deal.  Guess what....major problems and the borrowers loved me and are now looking for another property.  They weoud have hated me, along with the realtor, had I waited!  Good stuff here D.

Apr 14, 2009 02:19 PM
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

"I really wished I had the option of LARGER TYPE when I do this blog today!"  You should write your blogs in Word, my man.

Condos can be tricky and I just ran into some of these scenarios within the past year or so.  Now that I'm licensed in other states, I believe this type of stuff will come up more and more. Very informative blog, Darin.  I'm bookmarking this as young Sardi-san could use a bit more education on this particular subject.

And who is this Dewey Cheatum you speak of;)

Apr 15, 2009 02:32 AM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Gerry-   Thanks for commenting!  You are correct!   FHA I only left out becuz NOT everyone is set up for them!  They are similar, and I should re-blog it, or add something!  Thanks for the tip!

Larry- I could not agree more!  Great move on how you handled that CONDO situation!  That is exactly what I did, and continue to do as well!  This really helps the REALTOR understand the situation as well!

Jason-  Well, THANK YOU for the WORD TIP!  I did not know we could do that!  I am ASSUMING you cut & paste eh??  These issues will come up ALOT more on condo's and VICKIE left a very important comment here on the blog as well!  Thanks for playing!! :)


Apr 15, 2009 03:02 AM