Condominiums (Condos) appeal to many people looking to purchase property that requires less maintenance and allows you to gain access to attractive amenities. The mortgage process and lending requirements vary slightly from a mortgage to a traditional single-family home.
What is a condo?
A condo is a private residence or unit owned by an individual within a larger building or complex. A condo building typically has shared common areas like garages, recreational rooms, gyms, and outdoor spaces. The condominium association maintains these common areas, and the associated fees are paid for by the residents. The fees can also be called due or common charges.
Condominium Loan Requirements
The beginning of the condo financing process is similar to that of a traditional single-family mortgage – you will complete a loan application, submit any requested income and credit documentation, and the loan originator will submit your file to underwriting.
There are a few extra requirements, and the mortgage lender must follow them before approving your condo loan. The mortgage company will contact the managing agents of the condo building to request the following information:
Condo Occupancy Rate
Typically, a lender will require that at least 50% of the condo units are sold to owner-occupants before lending in the building. An owner-occupant is a resident that holds the title to that property.
The lender must ensure there is no current litigation. Some lenders may require a history of previous litigation and the outcome.
Building Reserves & Building Financials
The lender needs to make sure the building’s financials are sound. Typically, the building is required to allocate at least 10% of the building budget to reserves.
Commercial space (retail shops, restaurants, grocery stores, etc.) should not exceed 25% of the project’s square footage.
The condo must have adequate and appropriate building insurance.
Types of Condo Mortgages
FHA Condo Loans
Certain condominium buildings are approved by the U.S. Department of Housing and Urban Development (HUD) for FHA loans. Click here to review the approved buildings on the HUD’s website. As an Eagle FHA mortgage company, GuardHill is approved to lend in all FHA approved condo buildings.
Warrantable Condo Loans
Warrantable condo loans are for those purchasing within a building that meets Fannie Mae and Freddie Mac’s guidelines. Although, if the building does not meet specific parameters, you may be eligible for a non-warrantable condo loan.
Non-Warrantable Condo Loans
A non-warrantable condo loan is for someone purchasing a unit in a building that does not fit within Fannie Mae and Freddie Mac’s guidelines. Non-warrantable condo buildings fall outside of the traditional lending guidelines and may be more difficult to finance through a traditional lender who does not specialize in condo mortgages.
What are the Features of a Non-Warrantable Condo Building?
Low owner-occupancy rate
If the owner-occupancy rate is less than 50%, the building is typically considered non-warrantable.
High Investor Concentration
Investor concentration refers to the percentage of residents who own the units as investment properties. If the building’s investor concentration exceeds 50%, it is typically considered non-warrantable.
High Commercial-to-Residential Ratio
If commercial space (grocery stores, retail stores, restaurants, etc.) exceeds 25% of the project’s overall square footage, the building will be considered non-warrantable.
If the building has any current or pending litigation, a lender will deem it non-warrantable.
GuardHill lends in numerous non-warrantable condo buildings, providing flexibility for our borrowers looking to purchase or refinance a primary residence or investment property.
New Condo Development Financing
A new condo development may either be a condo project that is currently being built or recently developed and has not been approved by many lenders. GuardHill lends in virtually every building in the Metro NYC area and understands how to navigate the new condo development financing process to ensure fast closing. We will work closely with the building’s sales team, sponsor, and developer to ensure timely approvals and closings.
Why Work with GuardHill for Condo Financing?
Headquartered in New York City, GuardHill has extensive experience in condo financing. Due to our local expertise and lending volume, GuardHill is trusted among many developers, managing agents, and building sponsors in the condo industry. Our reputation and experience allow us to offer faster loan approvals and loan closings.