Challenges in Condominium Financing

In order to obtain financing for buyers on condominiums, lenders generally require a Homeowner's Association Certification to evaluate the financial feasibility of the development. When processing a loan on an existing condominium development most of the concerns are in the following areas:

• 1) Is there litigation in the development?
• 2) What percent of the homeowners are delinquent on their HOA monthly dues?
• 3) How many investors own units in the development?

FHA, VA, FNMA and FHLMC all have major issues with litigation and request a more in depth review of the association's budgets in those cases. The allowable maximum HOA delinquency rate is 15% for FHA and exceptions can be made to 20% on FNMA/FHLMC loans. The investor ratio to occupancy is 50% for FHA and 51% conventional.

We have two types of HOA Certifications, full and limited. A full certification asks all three questions above but a limited certification asks only if there is litigation in the development. This means in many cases we request only the limited certification and the delinquency and investor ratios are not furnished by the HOA. Therefore, the delinquency ratio and the investor ratio not considered in the underwriting of the loan file.

When financing with FHA and VA a full certification is always required. A limited certification is used on conventional loans when the buyer has a 20% down payment on a primary home and 25% down on a second home. On investor financing a full certification is always required.

If you have any questions contact Tim Lorenz your Mission Viejo Realtor

Tim Lorenz

Instant MLS Listings & Free Market Analysis

"We have actually closed many short sales!"

http://www.markandtim.com/

949-282-2521

Tim Lorenz . Over 40 Years Experience Representing South Orange County Home Buyers, Sellers, Investors and Relocations!