There are some REALLY good deals all over the Metro Phoenix Area right now…but before you get too excited about purchasing a condo make sure you understand the potential pitfalls with regard to financing.
Of course, securing financing is the most important step in any transaction…but there are additional concerns when the property is a condo.
According to Gina Chavez, Senior Loan Officer with Cherry Creek Mortgage, “The condo arena can be a little quirky. Here is some information to consider:
A loan may be eligible for a Limited Review if:
ü The borrower is purchasing the condo as a primary residence and has a down payment of at least 10%,or
ü The borrower is purchasing the condo as a second home and has a down payment of at least25%
ü Investor loans are not eligible for a limited review
Under the limited review, there are no occupancy requirements (investor vs. owner occupied/second home), no full legal review, no full budget review and no replacement reserve requirement. The following guidelines, however, must be met:
ü Cannot be ineligible – projects with timeshare units, condo hotels, multiple units under a single deed and/or mortgage
ü No single person or entity can own more than 10% of the units
ü No more than 20% of the total square footage of the project can be used for non-residential purposes
ü Evidence of insurance in the name of the HOA and must meet minimum insurance requirements.
All loans outside the specifics listed above will most likely need a full review. A Full Review requires the project to meet the 3 above mentioned guidelines PLUS the following:
ü At least 51% of the units must be owner occupied/second homes. Note: some lenders require a higher ratio of owner occupied units
ü Budget must have at least 10% of the total budget allocated to replacement reserves
ü No more than 15% of the unit owners can be more than 30 days delinquent in paying their HOA dues
Lenders will generally request a condo questionnaire be completed by the HOA and use the questionnaire, along with supporting documents if needed, to determine whether the project meets lending guidelines.
Condo guidelines continue to evolve and can be a bit cumbersome to interpret. Cherry Creek Mortgage Company, Inc has a condo review department that solely exists to assist in determining project eligibility.
Bottom line: As long as the property you decide on is a condo, there may be some extra hoops to jump thru…most of the verifying will be done upfront, typically the HOA Cert is $150.00 and will need to be paid for upfront. Also, there is a possibility of requiring up to 25% as your down payment. If the home you find is a Townhome or Patio home the above issues don’t apply.”
So…this does NOT mean that there is no financing available for condos…it just means there will be extra expenses and due diligence necessary.
As always… if you are looking for a GREAT agent to help with your real estate needs please e-mail me at Adele@GreaterPhoenixHomes.com or give me a call (or text) at 602-504-3898 or 888-897-7821 x 114. Plus, I have a GREAT search tool on my web site that gives you the ability to search the entire MLS…just like agents do. Very COOL! Go to Metro Phoenix Homes and check it out! YOU can create and save as many searches as you would like…and it it THE SAME SEARCH I DO AS AN AGENT! You will LOVE it!
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