Condos!!!

Condos are a place that makes most loan officers cringe. Since the downfall of last year, banks have become very strict on lending to condos. They see them as a risky investment and require a lot to get into. But still, banks will still lend money out for condos, with a higher interest rate of course. When you start looking for a condo, there are two questions you need to ask.

1) What is the occupancy level of the condo? That doesn't translate to how many people are living there, but how many people own there condo and live in it. People who rent out a condo do not count in the occupancy level. If it is less than 50%, you are going to run into some major problems. Usually you have to come to the table with at least 40% down payment to let them consider loaning you any money to buy it.

2) Is the condo a warrantable condo? A warrantable condo is a condo with features that lenders view as favorable in terms of their risk exposure on loans secured by individual condo units. Fannie Mae or Freddie Mac will not be able to buy the loans of condos if they are non-warrantable. To be warrantable, a condo must fit in one of these three classes:

CLASS I

1. Developers control of the homeowners association has been turned over to the condo owners
2. Project is not subject to additional phasing or add-ons which have not yet been completed
3. All common elements and amenities must be fully installed, completed and in operation
4. 70% of all units in the entire development must have been sold and or legally obligated to close
5. 70% of all units in the entire development must have been sold to owner occupants

CLASS II

1. Recent or current condominium conversions (from apartments)
2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years
3. Project is not subject to phasing or add-ons which have not yet been completed
4. All common elements and amenities are fully installed, completed and in operation
5. 70% of the units in the entire development must have been sold and/or legally obligated to close
6. 70% of the units in the entire development must have been sold to owner occupants
7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessments

CLASS III

1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year
2. Project is not subject to phasing or add-ons
3. All common amenities are fully installed, completed, and in operation
4. 90% of the units have been sold (owner-occupancy of at least 60%)

A CONDO QUESTIONNAIRE MUST BE COMPLETED BY THE MANAGEMENT TO DETERMINE PROJECT ELIGIBILITY

It's not a easy process, but when it's done, it will be more than worth it.