Posts Tagged ‘condo purchase’

Relaxing Criteria for Condo Mortgages

June 19, 2015

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Considering buying a condo now?  Your timing is good then.  In recent months, mortgage market makers Fannie Mae and Freddie Mac have loosened the lending requirements for condo purchases.  You can buy a condo with a credit score as low as 620 and a down payment of 5% or more.

Understand that the underwriting process is still different for a condo purchase, but the standards are being relaxed now.  As with single family home purchasers, underwriters will review the credit score, available assets, income, and debt of condo purchasers.

In addition, underwriters review the financial stability of the complex in which the condo is being purchased.  Condo complexes assess HOA (home owners association) dues to fund expenses such as maintenance for buildings and common areas, utilities, insurance, reserves for replacing large items like roofs and parking lots, etc.  When the economic crisis hit, owners at many condo complexes became delinquent on their dues payments, causing financial difficulties for the complexes themselves.  In reaction to this, lenders imposed tighter restrictions on condo underwriting.  Now lenders are relaxing these standards.

When underwriting the condo complex, the lender will require documentation from the complex management as follows:

  1. A completed condo questionnaire reporting details about the complex.
  2. Current year HOA budget.
  3. Master insurance policy.

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Below are some key condo criteria that the underwriters consider.  The underwriters will likely deny your condo loan if the complex fails to meet any one of these items:

  1. At least 10% of the annual HOA budget set aside for reserves.
  2. No more than 10% of the units owned by a single individual or corporation.
  3. No more than 20% of the units used for commercial space.
  4. No more than 15% of the homeowners more than 60 days past due on their monthly HOA dues.

Bottom line, if you want to buy a condo in a well-managed complex that meets the above criteria, it has a good possibility of being approved; but it will require some extra work as compared to buying a single family home.  I have financed multiple condos in the last few months and we have not experienced any issues with underwriting.  If you are looking to buy a condo in Georgia, I can help you get started!

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