Potential pitfalls for condominium financing
Buying a condo could be an exciting solution for your home buying needs. However, there are plenty of pitfalls that could emerge when purchasing a condo.
There are several questions asked on a condo questionnaire that could make the difference in the “lendability,” of a unit. Below are some potential road blocks that could emerge for financing:
- If the Homeowners Association or Developer are involved in any litigation other than as plaintiff
- If the project is a time-share or condotel
- Unit owners don’t have sole ownership and exclusive use of the project’s amenities
- The project allows multi-dwelling units
- Projects that are managed and operated as a hotel or motel, even though the units are individually owned
- Projects that represent a legal, but non-conforming, use of the land, if zoning regulations prohibit rebuilding the improvements to current density in the event of their partial or full destruction
- Projects with property that is not real estate, such as houseboat projects. Boat slips, cabanas etc. are not eligible for FNMA unless they are owned in common by the HOA
There are many more questions asked on the questionnaire, but not all are potential financing deal killers. For example, each project must maintain acceptable insurance and a general rule of thumb is that no more than 15% of the owners can be more than 60 days delinquent on their association dues. There are exceptions to the rules, however.
If you have questions on a condo please email us at GRARelocation@grarate.com to review the questionnaire and prep you for any of these potential pitfalls.