What To Provide To Your Lender Or Mortgage Broker
Before preapproving you, a lender or mortgage broker will look at:
- your assets
- your income
Youll need to provide the following:
- proof you can pay for the down payment and closing costs
- information about your other assets, such as a car, cottage or boat
- information about your debts or financial obligations
For proof of employment, you may have to provide:
- a proof of your current salary or hourly pay rate
- your position and length of time with the employer
- notices of assessment from the Canada Revenue Agency for the past 2 years, if youre self-employed
Your lender or mortgage broker may ask you to provide recent financial statements from bank accounts or investments. This will help them determine if you have the down payment.
Your debts or financial obligations may include your monthly payments for:
Why Choose A Condo Mortgage From Honor Bank
Honor Bank offers condo mortgages for new and experienced home buyers. Whether your new condo will be your primary residence or a vacation home for you and your family, we have the lending options you need, including these:
- Fractional ownership condo loans at locations such as Crystal Mountain and The Homestead
- Fannie Mae, FHA, VA and Portfolio options
Look For A Warrantable Condo
A warrantable condo is one that fits eligibility requirements set out by Fannie Mae and Freddie Mac.
These agencies, which purchase and insure most of Americas conventional loans, want to make sure the condo is in a financially sound community before they buy the loan.
Fannie Mae and Freddie Mac say that warrantable condos generally meet these requirements:
- No more than 15% of units are delinquent on condo association dues
- The association holds at least 10% of its annual budget in reserves
- A certain percentage of the units are owner-occupied
- The condo development has many individual owners so no single entity owns more than a certain number of units
- The association carries appropriate insurance coverage
A non-warrantable condo does not meet these requirements, and it will be harder to qualify for a mortgage. In this case, you might consider buying a single-family home or paying for the condo with cash.
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The Benefits Of Getting A Reverse Mortgage On A Condo
There are many financial resources for seniors struggling to get by, including the government-sponsored HECM program. This program allows senior homeowners to take advantage ofreverse mortgage benefits, which include:
- The ability to pay off an existing mortgage
- Supplement a fixed retirement income
- Payoff other outstanding debts
- Afford large purchases
- Age independently at home
Its recommended that senior adults plan to finance a retirement period of at least 20 years, which many retirees are not ready for. According to the National Council on Aging, over 15 million seniors living in the United States are economically insecure, making it difficult to pay for medical bills, housing expenses, food, transportation, and so forth.
If you find yourself struggling to make ends meet with your personal savings, Social Security benefits, and retirement distributions, then you may be able to increase your monthly cash flow with a HECM. Our reverse mortgage calculator can estimate how much you may be able to receive in loan proceeds.
When Does The Mortgage Payments Start On A Pre
You start making mortgage payments on the final closing costs, not on the occupancy fee. Generally, the occupancy periods are 3 to 6 months before the final closing date. Final closing is when the condo building is officially registered with the city and when youll receive the title to your pre-construction condo unit. Closing costs include development levies, warranty fees, legal fees and land transfer tax.
Instead of your mortgage, youll have to pay the builder occupancy fees from the time of occupancy to final closing.
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Fha Rules For A Condo Loan
Condos are often a popular choice for first time homebuyers due to their lower prices, and FHA loans are an equally popular funding source for first time buyers due to their low down payment options. Insured by the Federal Housing Administration, FHA loans allow borrowers to finance homes with down payments as low as 3.5%. Your rate will still vary based on your unique situation, and donât forget to account for the FHA mortgage insurance fee of approximately 1.75% of the loan amount. In order to buy a condo with an FHA loan, you will need to make sure that your purchase meets the following requirements:
- FHA-Approved Condo List: The condo must be listed on the FHA-approved condominium list.
- Primary Residence: The condo you are buying must be your primary residence, not an investment or vacation home.
- Percentage of FHA Loans: FHA will only allow up to 50% of the units to be financed with FHA.
- Percentage of Owner-Occupied Units: At least 50% of the units in the complex have to be owner-occupied, regardless of how they are financed.
The Crowning: Closing Documents To Retrieve The Keys
Timeline: 1 day 1 week
If youve made it through processing and gained your final approval, its time for closing! You used to have to worry about a full day of signing stacks of papers, though now you usually have the option to sign most of these online. Youll still need to show up to a closing appointment to sign at least a few documents, and snatch those new, shiny keys!
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Condo Associations Can Borrow: A Mortgage Broker Tells You How
Patrick B. Nilandin Legal/Financial
“No,” your condominium cannot get a mortgage loan. That’s because the legal structure of a condominium is fundamentally different from that of a cooperative. In a cooperative, an apartment corporation owns the entire building and acts as landlord to all of the residents. Each resident receives a certain number of shares in the apartment corporation and a lease that entitles him or her to occupy their apartment. Since the apartment corporation owns all of the real estate, it has something to mortgage.
In a condominium, each owners receives title to an individual unit, as well as to an undivided, pro rata ownership interest in the common elements of the condominium association . Since each person owns a piece of the real estate, each has something to mortgage, and many condo-apartment owners do just that.
However, in virtually all cases, the condominium association itself does not own any real estate. Consequently, it has nothing to mortgage.
Yet, condominium associations always have had a very valuable asset to offer as security for loans: their right to set and collect the monthly carrying charges from all unit-owners. If the carrying charges are set at a level sufficient to pay all of the operating expenses of the condominium plus the debt service on a loan, most lenders would accept that right as collateral.
A Familiar Process
The entire process, from start to finish, will take 60 to 90 days.
Warrantable Vs Nonwarrantable Condos
A warrantable condo is one that potential home buyers can finance and underwrite using a conventional mortgage. In order to do so, the condo must first meet certain minimum guidelines laid out by traditional mortgage investors like Freddie Mac and Fannie Mae. For example, to meet these requirements, sample guidelines include stipulations such as:
- No single entity can own more than two units in projects consisting of five to 20 units, or 20% of units in projects consisting of 21 or more units.
- At least 50% of the units are owner-occupied as opposed to being investment properties.
- Less than 15% of total units are 60 days or more in arrears on association dues.
- The homeowners association is not named in any lawsuits.
- Commercial space accounts for 35% or less of the total building square footage.
Non-warrantable condos are more difficult to buy and sell, as Freddie Mac and Fannie Mae have determined them to be too risky an acquisition, making them more difficult to acquire financing for. To obtain a non-warrantable condo, you may have to seek outside financial assistance beyond that which could typically be obtained through a conventional mortgage or traditional lender. Feel free to speak to one of our Home Loan Experts about your options.
Get approved to buy a home.
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Everything You Need To Know About Buying A Condo
Before purchasing a unit, consider whether youre a good fit for condo living and whether the condo itself meets mortgage-program requirements.
Edited byChris JenningsUpdated January 4, 2022
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. By refinancing your mortgage, total finance charges may be higher over the life of the loan. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
Theres a lot to like about condo living. Depending on where you live and the specific community, a condo could come with a cheaper mortgage, less maintenance, and plenty of top-notch amenities.
But there are some drawbacks to living in a condo community beginning with the loan. Your lender will put the condo under extra scrutiny during the underwriting process to make sure it meets all sorts of requirements.
Heres what you need to know before buying a condo:
You Can If The Condo Is Your Primary Residence And Fha
If youre an older adult, you may be able to get a reverse mortgage on a condo. A reverse mortgage lets homeowners age 62 or older access their home equity while remaining in the houseand retaining the title.
There are not only strict borrower requirements for obtaining an HECM but also rules defining which properties are eligible. The rules described below apply to HECMs, so if you have a different type of loan, contact your lender or loan servicer if you have questions or concerns.
S To Qualify For A Loan
Before applying for a loan, do your research to see if youd qualify for one. Look into the requirements for conventional, USDA, FHA and VA loans from the lenders you wish to borrow from. Additionally, youll need to get your finances in order, seek out pre-approval, and make sure the condo community youre purchasing from is financially sound.
Get your finances in check
Make sure you have money for a down payment in your bank account and check your credit report.
Explore your loan options
Look into your loan options and see which ones you qualify for and want to apply for.
Cons Of Owning A Condo
Some of the drawbacks of owning a condo are:
- Restrictions on renovations and lifestyle choices: A condo HOA can set regulations and restrictions that make it difficult to renovate your unit the way youd want. There may even be restrictions on noise levels and the number of occupants in each unit.
- Higher monthly fees: HOA dues and shared building expenses can add up quickly and pile up on top of your other monthly expenses, like utilities and insurance.
- Higher mortgage interest rates: Because lenders consider condo loans higher risk, the loans typically come with higher interest rates, which may make them harder to afford for low-to-moderate income buyers.
- Harder to sell: Its harder to sell a condo than a single-family home because of the drawbacks already mentioned on our list.
Recommended Reading: Should You Roll Closing Costs Into Mortgage
How Does A Condo Mortgage Differ From Other Mortgage Types
The major differences are that mortgages for condos often involve extra steps and additional paperwork, as well as come with slightly higher interest rates.
Rates are typically higher by 0.125 percent to 0.25 percent, according to Steve Nakash, managing director of Denver-based Blue Spot Home Loans, a division of Cherry Creek Mortgage. Thats because restrictions or assessments imposed by the propertys homeowners association or condo association are out of the borrowers control, which creates a layer of risk for lenders.
Your lender must obtain additional documents from either the condo association, HOA or management company, as well. These can include:
- A questionnaire form about the condo project
- Information on how many units are owner-occupied versus tenant-occupied and how many are owned by one entity
- A copy of the condo associations master insurance policy
Essentially, the lender needs to approve both the individual buyer and the condo project for financing, Nakash says.
To do that, the condo project itself must be vetted and meet lender standards. For example, current lending guidelines dictate that no more than 15 percent of unit owners can be behind on their condo dues, and one investor cant own more than 10 percent of the units, according to Jeffrey Loyd, principal of Mortgage Acuity, a mortgage broker in Hackensack, New Jersey.
Difference Between Condo And Townhouse
Heres how townhomes stack up against condos:
- Ownership: Townhomes have two primary types of owners: condominium ownership and fee-simple ownership. With condominium ownership in a townhome, your unit responsibilities are structured similarly to condo units. Namely, you own the inside of your unit, and HOA fees cover common areas and the exterior. With fee-simple townhome ownership, youre responsible for the property itself and the land it sits on.
- Rules and responsibilities: Generally, condo associations have stricter rules than townhome HOAs because townhomes require less maintenance. When you own a fee-simple townhome, youre in charge of the upkeep for the interior, the exterior and the lot itself.
- Costs: Townhomes tend to be less expensive than condos because the size of the lot is typically bigger than a condo. Youll also tend to pay less in overall HOA fees, but you should consider the costs associated with maintenance on the house and property.
- Amenities: There are usually fewer amenities offered in townhomes compared to condos, though newer build townhome communities may include resort-style living offerings, like pools and playgrounds.
- Maintenance: As mentioned, youre not paying as many HOA fees with a townhome compared to a condo, but youre responsible for more upkeep. When you own a condo, youre only responsible for the interior, but when you own a townhome, youll be paying to maintain the interior, roof, exterior and property.
Get approved to buy a home.
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The 2 Types Of Condo Approvals: Full Vs Limited
This next section summarizes the key elements of each review type if you want the actual granular details straight from Fannie Mae, . A major factor in differentiating full and limited reviews is whether or not your condo is an established project:
What is an established project?
- At least 90% of units are sold and closed, AND
- The project is 100% complete including all units and common areas, the project is not subject to additional phasing, AND
- Control of the HOA has been turned over to the unit owners.
Need help? Dont suffer through the details alone! Contact Accunet Mortgage for step-by-step guidance on financing your condo through Fannie Mae.
Limited condo reviews
Limited condo reviews are a streamlined review process for lower-risk loans. Condos with limited reviews are usually way more likely to be approved than those submitting full reviews. Luckily, most condo purchases and refinances fit into this category.
A condo fits into the limited review category IF:
- The condo is an established project, AND
- The buyer/owner will occupy the unit as a primary residence or second/vacation home, AND
- The buyer/owner is putting at least 10% down
Heres a link to Fannie Maes limited condo review questionnaire with the actual details of the info the condo HOA will be asked to provide.
Full condo reviews
Full condo reviews are much more intensive than limited reviews.
The Finale: Finish The Mortgage Process
Timeline: 7 days 2 weeks
With your appraisal already out of the way, the rest of the process should be a breeze. Especially if you already got that pre-approval we talked about . Processing time may vary depending on your lender, though Movement aims to get you done here in just 7 days!* #HumbleBrag.
Read Also: What To Know About Getting A Mortgage
Research The Condo Association
Before buying a condo, youll want to research the association to make sure the unit is a good investment.
Ask the association for copies of its governing documents, which will give you all the details on its financial health.
Youll also want to see whos in charge of maintaining the day-to-day operations. If its a property management company, you can research its reputation via the Better Business Bureau or through online reviews.
What To Do If A Lender Refuses Your Mortgage Application
A lender could refuse you for a mortgage even if youve been preapproved.
Before a lender approves your loan, theyll verify that the property you want meets certain standards. These standards will vary from lender to lender.
Each lender sets their own lending guidelines and policies. A lender may refuse to grant you a mortgage if you have a poor credit history. There may be other reasons. If you dont get a mortgage, ask your lender about other options available to you.
Other options may include:
- approving you for a lower mortgage amount
- charging you a higher interest rate on the mortgage
- requiring that you provide a larger down payment
- requiring that someone co-sign with you on the mortgage
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