When it comes down to purchasing condos and co-ops, it isn’t just your creditworthiness the lender takes into consideration. Your mortgage lender must also verify the fiscal and physical health of the entire condominium development into which you’re buying.
Fortunately, with the housing market doing well and condo values climbing, mortgage lenders allow looser guidelines — even low-down-payment.
Lenders look at more than just your credit score when deciding whether or not to give you a loan for a condo or co-op. The financial and structural stability of the entire condo complex you’re purchasing must be verified by your mortgage lender.
Thankfully, mortgage lenders have become more lenient in recent years as a result of the booming housing market and rising condo values.
Condo-hotels, timeshares, fractional ownership properties, and other developments that require owners to join an organization, such as a golf club, are all common examples of non-warrantable assets.
Houseboats, RVs, and other types of manufactured housing, as well as any kind of development that is not technically considered real property, are not covered by the warranty. Before you commit to purchasing a condo, it is important to discuss the building’s warranty with your real estate agent or lender.
A condo or co-op unit is typically not warrantable if the development has not yet reached substantial completion. Or the builder hasn’t handed over the HOA or board to the residents yet. Or that the complex welcomes vacation rentals. A condo or co-op is also not warrantable if 10% or more of the units are owned by the same person or company or if the majority of the apartments in the building are rented out to people who do not own the property.
As an additional note, a condominium in a construction project that is the subject of any form of lawsuit is often “non-warrantable. The lawsuit can be filed with the development as either the plaintiff or the defendant.
Fannie Mae, Freddie Mac, the FHA, and the VA do not provide financing for non-warrantable condos. Non-warrantable condo mortgages are available through SteveKnowsLoans and other specialized lenders. When it comes to condo financing, mortgage lenders have varying requirements and policies.
Fannie Mae and Freddie Mac each have their own set of requirements that every condo association must meet, such as the minimum amount of funds the association must have in reserves, the number of tenants who are delinquent on their HOA fees, and the number of units that are rentals or investment properties.
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