Mortgages For Condominiums

Mortgages for Condominiums have special rules that do not apply to mortgages for home loans.

Market values of Condominiums in some areas of California dropped by approximately 40% during the economic downturn which is good news if you are a cash buyer but not so good if you are looking for a mortgage.

Also the Lender will look at the condominium association when it assesses you mortgage loan application, so if the association is in a lawsuit or has some other problems it will effect your application negatively. A good realtor will warn you if there is any cause for concern on the part of the association.

Some condominium association fees can be steep! These monthly payments will beĀ included by the lender in the calculation of the debt to income ratio, together with mortgage payment, property taxes, and required homeowner's insurance.

Another consideration when looking for a mortgage for a condominium is whether it is approved for FHA, Fannie Mae or Freddie Mac mortgages. If it is not, the chances of finding a mortgage will be slim and if you do be prepared to pay higher then " market " interest rates on the mortgage loan.

With an FHA mortgage you can put down as little as 3.5% but the FHA requires on a new developmentĀ that no more than 10% of the units be owned by the same entity, meaning that on a new project the developer must have found buyers for other units. Onan existing development the limit is 50%.

Another concern is that FHA will not approve a mortgage on a condominium if more than 15% of the unit owners in the condominium development are past due or late (more than 60 days)Ā on payment of association dues.

With a condominium mortgage backed by Fannie Mae or Freddie Mac the down payment requirement will be 5-10% of purchase price. Also if you put down less than 25% then another fee kicks in: up-front fee of 0.75% of loan amount or additional 0.25% on the mortgage interest rate - your choice!

Also if you put down less than 20% you will be required to pay for private mortgage insurance (PMI).

Another option is to consider purchasing a condominium that was foreclosed on through Fannie Mae's HomePath and Freddie Mac's HomeSteps programs. Advantage: you can put down as little as 3.5% down and there is no requirement for mortgage insurance or for the association to be assessed.

If a condominium is not approved for a mortgage by FHA, Fannie Mae or Freddie Mac then it is " non-warrantable " . There ar options available based on individual circumstance. Please call us to discuss.


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