Getting Financing for Condos: Question you Must Ask!

CONDOS (not Townhouses)

Investors, first time home buyers and empty nesters LOVE them! Condos offer a great price point in metropolitan areas, an easy of living and are low maintence as the HOA is responsible for the exterior and grounds.  But keep in mind, lenders have increased lending qualifications for condos. This is because condos are a haven for foreclosure. Heavily investor-owned, it is the first investment to go bad, especially when dues are not being paid and the property begins to deteriorate.  We have seen this happen in Houston! There are entire buildings around town that were foreclosed upon as the result of ‘straw’ buyers and dishonest developers.

Questions to ask the HOA before submitting an offer:

·       Owner Occupancy rate (50% for FHA, 70% for Conventional)

·       Are >15% of the owners delinquent on HOA monthly dues

·       Is there a min. of 1 mm fidelity bond insurance in place? (***this is addressed on the ‘master’ policy, and can often be missed until closing **)

·       Are there and pending lawsuits (if so, what are the details)

·       Does the budget allow for deferred maintenance (meaning….there is none, right?) *we will want to see reserves on their operating statement too- to avoid deferred maintenance

·       Does more than 1 entity (aka, person, bank, etc….) own >10% of the units? **Bank foreclosures are NOT exempt from this equation!