Hurdles to buying a condo

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If you thought selling a condo is hard in metro Atlanta (or other parts of the U.S.) because of the number of condos on the market, well is getting even harder. Financing a condo is becoming more and more difficult. There are more hurdles to jump in order to be qualified to buy a condo regardless of whether or not you are using an FHA or conventional mortgage.

The down payment (at least in the state of Georgia) isn’t the issue. You can buy a condo with 5% down on a conventional loan or 3.5% down on an FHA loan. The problem is the condominium communities themselves. Let me explain.

If you are buying a condo, lenders would prefer the condominium community to be pre-approved by Fannie Mae or FHA. Do you know how many condo complexes are approved by Fannie Mae right now in the state of Georgia? Take a stab at it… how many would you think would be approved in the entire state?… 11. That is right, only 11 complexes. Don’t believe me? Take a look at this list from Fannie Mae’s website. I pulled this list at the writing of this post.

That isn’t for a section of Atlanta, or the city of Atlanta, but the entire state of Georgia. What does that mean? Basically it means Fannie Mae isn’t a big fan of funding loans for condos right now 😦

If you are looking to buy a condo using a conventional loan, ask your loan officer if their company uses “CPM Review”. This is Condo Project Manager review, which will expedite the process of applying for a loan on a condo. If the lender doesn’t offer CPM, and not all of them do, then find a lender that does use it. As a mortgage broker, I have lenders that do offer CPM Review for condos.

It isn’t much easier using an FHA loan. Before 2012, if a condo was FHA approved, you were good to go with a loan in that complex. Things are different now. Starting this year, an FHA approved condo means you are only half way there.

While FHA approves condominium communities, the occupancy rate is reaffirmed at the time of loan application. That means a condo questionnaire must be completed, and the owner occupancy rate must be above FHA minimum requirements. Gone are the days of a two year approval where FHA doesn’t re-evaluate a complex until it is time for renewal.

Looking to buy a condo? Determining if the condominium is warrantable (able to get a loan) is just as important as the home inspection and appraisal process. You should ensure the condo you are looking to buy can get financing early in the process. Ask your loan officer specific questions about whether or not the condo is warrantable. If not, then I wouldn’t proceed with the loan process and pay for an appraisal or home inspection.

How do you help your loan officer determine if the condo is warrantable? First, provide the property address and name of the condominium community. If listed on FHA or Fannie Mae’s pre-approved list, you are halfway there. Next, get a condo questionnaire completed and reviewed by the lender. Once you know you can get a loan to buy the condo, then make the offer, inspect the home, and order the appraisal.

With the uncertainty in obtaining financing on condos these days, it is imperative to work with a loan officer who is aware of the unique challenges presented by a condo. If you are looking to buy a condo in Georgia, I can help you get started!

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3 Responses to “Hurdles to buying a condo”

  1. Looks can be deceiving « The Mortgage Blog Says:

    […] The Mortgage Blog Professional, Honest Mortgage Advice from Dunwoody Mortgage Services « Hurdles to buying a condo […]

  2. Janet Livingston Says:

    As a real estate broker I find the situation extremely one sided and not on seller or buyer side but Fannie Mae’s agenda. I have numerous condo listings and in beautiful buildings that buyers fall in love with but unless it is a foreclosure already we can not short sell them or get any lender to finance. Any solutions?

  3. jp Says:

    It is tough as someone trying to sell a condo. If not FHA approved or Fannie Mae approved, getting typical financing is hard. I do know of people who have successfully received private loans to buy condos. That is the direction some are turning in the current lending environment for condos.

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