Confused about condo financing?
Despite limited inventory, Northwest Multiple Listing Service brokers report more condo sales than a year ago. The robust activity is prompting more inquiries about financing options and requirements, according to Jeff Tisdale, senior loan officer at Primary Residential Mortgage, Inc.
To help brokers sift through the maze, Tisdale compiled a quick-reference guide for readers of Northwest REporter. "Hopefully, this will calm any aversions to condos and make it easier to move them through the process," the industry veteran commented.
For FHA financing, condos need to be FHA approved. Brokers can find a tool on a HUD site to search for FHA-approved condos by location, name or status. Drop down menus and entry fields enable narrowing searches to specific types of projects. Detailed help is available online or by clicking on a link to connect with an administrator.
VA-approved condos are also easy to uncover with a similar search tool at a VA portal. Just follow the prompts to generate a list. For example, a recent search unveiled 2,246 approved condos statewide that are registered with the VA's Seattle office. The search can be refined by entering a county name (e.g., of that total, 186 are in Pierce County), or other criteria. By clicking on the condo name, details about the dwelling are revealed.
Tisdale said conventional financing is "slightly more involved" as it depends on whether it is a full lender review or a limited review based on credit risk assessments and approvals using Fannie Mae's DU (Desktop Underwriter®) or Freddie Mac's LP (Loan Prospector®).
"Limited reviews obviously have less documentation/requirements, but the majority of time I come across full reviews," Tisdale stated.
Depending on whether the subject property will be owner occupied or an investment, it may be subject to occupancy thresholds.
Agency guidelines typically require 10 percent of a homeowner association's total annual budgeted assessment income to be allocated toward reserves. If the HOA fails to allocate 10 percent of the budget to reserves, then it must supply a Reserve Study. Failure to do so poses problems, Tisdale emphasized.
Tisdale outlined six basic requirements associated with a Full Lender Review:
- Fully completed Condo Questionnaire.
- Full Appraisal- if the AUS allows for an appraisal waiver, alternative documentation must be provided to verify all condo warranty requirements.
- Most recent audited financial statements or proposed annual budget.
- Ground lease if applicable.
- Project CC&Rs, Public Offering Plan or equivalent and all amendments when applicable.
- Master Insurance Policies from the HOA.
Tisdale - www.jefftisdale.com - is licensed in both Washington and Arizona. During his career, which dates to 1987, he has closed more than 3,300 transactions valued at nearly $1 billion in home loans, earning him recognition as one of the nation's top producers.