Condominiums are a unique legal entity, with different requirements in order to obtain financing approval. Condos may appear similar to townhomes, and projects may call itself one or the other in marketing pieces.
Did you know condo owners do not own the land under their condo? Both have an active Homeowners Association (HOA) controlling common areas, management and maintenance. However, extra care needs to be given if you are dealing with a legal "Condo." Please inform your loan officer if your client is considering a condo, as more stringent loan-to-value (LTV), credit score requirements, pricing and other program guidelines may apply.
Condo growth has exploded in the metro Atlanta area in the past few years, at the same time the loan guidelines and market was constricting. FHA has recently eliminated "spot approval" of condo projects, which used to be a popular solution against projects not being on the HUD condo list. The approved condo lists can be found on-line at:
Conventional - www.efanniemae.com or FHA - www.hud.gov
Even if a project is on the approved list, updated information will need to be collected from the Homeowners Association to ensure continued viability. In addition a condo is required to have a different appraisal form, as opposed to a townhome/PUD/single family residence.
If the project is not currently approved on the Fannie or HUD lists, I can aide in helping to obtain condo approval. Ask me how. Full approval can be time consuming and requires many forms and documentation to be submitted. Limited Review may be used in a primary/ second home situation. Here are some of the conventional highlights that can be required before condo project approval is given.
•· Presale must be equal or greater than 70%.
•· Subject legal phase is 100% complete.
•· No single entity owns more than 10% of the total units.
•· No more than 15% of the units can be over 30 days past due on the HOA fees.
•· Non-owner occupied units must be less than 50%.
The Homeowners Association status is also key, and they cannot currently be involved in a lawsuit. Insurance and fidelity bond coverage requirements also will need to be met by the HOA. We are starting to see H06 requirements, to cover buyer upgrades and improvements.
This is not meant to be a definitive guide to condo approval, but is an overview and highlights the extra care that is required with condos. Condos can be a good bargain, but proceed with caution and proper expectation of the process.
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