Live Rate Quotes
Real Estate Chart of the Day
Mortgage rates and markets change constantly. Stay 100% current by taking The Mortgage Reports by email each day. Click here to get free email alerts, or subscribe to the RSS feed in your browser.
As mortgage lenders reduce their respective lending risk, certain condominiums around the country are being specifically excluded from approval.
It's stymieing purchase and refinance activity in Chicago, Florida and everywhere else a "non-standard" condominium exists.
Click here for a mortgage rate quote.
A non-warrantable condo, by definition, is a condominium that does not meet the minimum eligibility standards as set by Fannie Mae and/or Freddie Mac.
When condo buildings fail Fannie and Freddie's minimum standards, it's often for one or more of the following reason:
There are other non-warrantable traits, too, including too many "unsold units", certain types of pending litigation, and length of time that the condo board has been in control of the building's owners. The list is quite long, actually; the most troubling non-warrantable trait being Fannie Mae's requirement for homeowner association dues to be at least 85% current.
In other words, if more than 15% of a condo building's owners are delinquent to the association, conforming mortgages are unavailable to everyone that lives there.
The mere presence of any of these characteristics instantly characterizes the building as "non-warrantable", preventing building owners from securing conventional mortgage financing on today's mortgage guidelines.
This fact can surprise homeowners who may otherwise be well-qualified.
For home buyers and owners facing a non-warrantable condo situation, good credit, good income, and good downpayment suddenly becomes irrelevant. It's the new truth in lending:
It's not just about the buyer anymore; it's about the building, too.
The same set of rule applies to another type of condo classification; one that's normally associated with luxury and vacationing. The condotel.
Condotel is a portmanteau of the words "condominium" and "hotel". It describes buildings used as both a condo and a hotel, with owners keeping the rights to rent their units while they're not actually using them.
Most often, condotel rentals are managed by an on-site rental company.
A typical condotel arrangement would be in say, Miami, where a family owns a unit in a condotel building on the mountain but only visits Miami 6 weeks per year. During the other 46 weeks, the on-site rental company rents the unit as a "hotel room" to other Miami vacationers.
The Trump International Hotel & Tower in Chicago has a similar setup.
Like non-warrantable condos, condotels cannot be financed through Fannie Mae or Freddie Mac and so, more often than not, condotel buyers have found themselves up a creek; ready to close but unable to find financing.
Thankfully, mortgage money is available for condotels and non-warrantables -- you just have to know where to look.
Over the last few weeks, less than a half-dozen banks chose to re-open the market for non-warrantable and condotel mortgages. Rates typically run a half-percent higher than comparable conventional mortgages and the minimum downpayment starts at 25 percent.
Beyond that, however, getting an approval is simple.
That's it. Now, there are some building considerations, too, but they're not nearly as tough as what Fannie or Freddie would throw at you. And the building requirements are more geared toward making sure the building is well-constructed and insured than anything else.
Every reputable condo and condotel in the country is going to pass that test.
And even better -- because approvals are being handled by individual underwriters and not Big Banks, loan approval times are decidedly quick. It's perfectly reasonable to close on a condotel or non-warrantable condo in less than 30 days.
15 days from contract-to-closing is common with condotels and non-warrantables.
If you're under contract for a non-warrantable condo or condotel in Chicago, Florida or somewhere else, and can't get your financing together, let me know. I can lend on non-warrantable condominiums and condotels in many states.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator call 513-443-2020.
Bonus: Click to get a free, no-obligation rate quote. I love to work with my readers!
Since you have reached the end of this post, you may be interested in checking out the related posts below.
