Since then, lenders have eased these restrictions, and roughly 95 percent of all condominiums today are eligible for financing with mortgage insurance. People are often able to purchase condos with a down payment of only 5 percent, whereas in the years following the housing bust, many were required to make down payments of as much as 30 to 45 percent.
Some lenders offer financing without requiring buyers to meet the same requirements as Fannie Mae and Freddie Mac, and the terms of these loans are comparable to those of more conventional loans. Give one of our friendly agents a call today at Call Us Today: I live in an area where condos are on the rise.
It is so amazing to me that they have so many being built at this time. I really like what was said about investing in a condo because it could be super beneficial financially especially if you are doing it in or near a college town. Your email address will not be published. The other inherent risk with condos is that rules are set by an organization rather than the individual owner of the residents which might make it unattractive to potential buyers in case of foreclosure of the unit.
Finally, the viability of the complex is very dependent on each individual owner so if multiple owners are unable to make payments it can jeopardize the entire investment. The borrower can mitigate this hired by simply putting up a larger down payment and reducing the risk exposure of the lender.
Failure to put down a large down payment will lead to higher mortgage rates that in turn leads to a more expensive loan for the borrower. Again this is a function of the risk exposure to the lender where they try to mitigate this risk by compelling the borrower to put down a larger down payment.
When computing the viability of a mortgage loan, lenders rely on an accounting function called debt to income ratio. The lower the proportion of the debt is to the income then the more likely the borrower is to finance their monthly mortgage payments. The monthly payments to the HOA constitute part of the debt part of this ratio. For individuals looking to purchase an Eighty Seven Park condos, then the higher the HOA fees, the more adversely it will impact their approval of the mortgage loan.
Prospective condo buyers should also be aware that HOA fees are not static and can undergo dramatic increases leading to severe strain on individual who also has mortgage payments to service. Not all real estate property has access to the many financial loan types available. Some mortgage types like the FHA which is federally funded have certain standards that must be met before the complex is eligible and listed as a property that can be financed by FHA mortgages.
Some of the conditions that would have to be met include that at least half of the units in the complex are owner-occupied meaning that they are not available for rental purposes. The FHA also requires that the property undergoes a financial review that is valid for the last 12 months. These stringent conditions mean that it is harder to finance an Eighty Seven Park condo purchase from federally sourced funds. The other steps that mortgage lender undertake to reduce the mitigation of financing a Eighty Seven Park condo include.
Reviewing the finances of the HOA including its reserves to establish its financial health. They evaluate the HOA documents for any red flags that might lead to a depreciation of the asset they have loaned money on.
So now you know as much as me - lets revisit some key points. If taking a listing don't put on the MLS until you know the above - or better yet make the HOA complete the Ultimate Condo Questionaire I created to make sure you get flooded with the right type of buyers. Rates tend to be higher, ratios tighter, LTV's more restrictive as it isn't so much a mainstream product as is an SFR. And with the recent foreclosure fiasco and the highest concentration of defaults being in Condo's.
Lenders are nervous to jump back into this segment until the condo arena has stabilized much more. So if you have a buyer before making an offer go to the HOA and get them to complete this questionaire: Ultimate Condo Questionaire. Now, please be warned the HOA's will want to charge, they will resist filling this form out completely. Because this form is an amalgamation of every lenders condo questionaire.
So when I have a client I am not doing one at a time investor specific forms but covering all the basis so we know no matter what happens someone will finance this buyer's home for them as they have gotten all the information up front. I hope you are all like me Any questions always give me a call Thanks for stopping by reading, sharing, and commenting on my blog: Why are Condos so hard to finance? Thanks for the great information!
I'm going to re-blog on my facebook page so when my clients as I can direct them to your article: have a great weekend!!
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