I was talking to our in-house loan officer the other day about condo purchases. The market has been hot for all types of properties, but I did want to make sure we were on top of things especially when it came to helping someone purchase a condo. He gave me some guidelines I thought I'd share as it may not only help our agents but others in the marketplace.
For FHA/VA/Conventional loan types:
1) How many units are in the project? (guidelines for 2-4 unit projects different than larger properties)
2) How many unit owners are delinquent on their HOA fees? (can't be more than 15%)
3) Does one person own more than 10% of the total number of units? (one person can't own more than 10% of the total units)
4) Are there any Commercial Units as a part of the project? (no more than 20% of the total square footage is allowed)
5) Does the HOA hold at least 10% of their annual budget in reserves? (the answer should be yes)
6) What percentage of the total number of units are owner occupied? (for FHA and VA- must be at least 15% owner occupied. For conventional see #7 & 8)
Additional for Conventional
7) If the property being purchased is "investor" or 2nd home, total investor ratio can't exceed 49%. (at least 51% owner occupied)
8) If the property being purchased is "owner occupied", the total investor ratio allowed is based on the down payment: a) if less than 20% down, max investor ration is 30% and b) if 20% or more down, can do higher than 50% investor ratio on case by case basis
9) Is there any pending litigation in the project?
These of course are just some guidelines and you may not have the answers up front. But it may be worth doing a little digging to save you and your client from rejection down the line.
You can always check out FHA and VA condo approval by visiting:
FHA- https://entp.hud.gov/idapp/html/condolook.cfm
VA- https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch
Or of course you can always check with your loan officer.
Happy House Hunting!
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