How to Jump Through Condo Loan Hoops
Tampa Hard Money Network | Bradenton Bad Credit Refinancing
Condo purchases can be a hard sell to mortgage lenders. They not only require you to qualify, they will then qualify the condo association. Condos have traditionally been a bellwether of mortgage industry health, and many lenders consider them too risky. Because many condos are purchased as rentals, a high rental occupancy in a condo development can be a negative if you are trying to purchase there as your future home.
As an example, Fannie Mae has strict condo financing guidelines, including:
- Owners must occupy more than one-half of the units
- No single owner can own more than 10 percent of the units
- There is a maximum of 15 percent delinquent association dues
- All amenities must be completed if the development is more than one year old
- Buyers making less than 25 percent down payment will pay additional fees at closing
Prospective owners need to determine if their condo purchase is eligible for FHA, Fannie Mae, or Freddie Mac loans. Condos considered “non-warrantable” can still be purchased, but significant down payments will be needed or the condo must be purchased for cash. Buyers will also need to show excellent credit ratings, and be prepared to pay higher interest rates than conventional mortgages.
For condo buyers looking to purchase for commercial rental purposes, a hard money loan may be a useful option. Because the buyer may need significant down payments, hard money investors may be willing to loan the balance needed to purchase the condo. Buyers should be ready to show potential income statements based on comparable properties in the development, and a good credit rating won’t hurt either. Hard money investors don’t put as much emphasis on credit ratings as do conventional lenders, but rather need to see income potential so their investment gets repaid. You may also wish to consider a hard money loan as a bridge while you secure longer-term mortgages if needed, as the hard money investors are typically looking for shorter loan times of perhaps less than 10 years.
If you are interested in purchasing a condo property in the greater Florida area, contact AHL Hard Money Network today. We can discuss your property plans and help you decide if a hard money investment is your best way to get into commercial condo properties.