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Condominium Lending - The Ultimate FAQ Guide

When you start to look into condominium lending, it can feel like you're jumping into the deep end of the pool without knowing how to swim. Many companies, professionals, and strategies are involved in the process, and understanding how each work will help you be more confident throughout the journey.

If you're in the market to purchase a condominium, the chances are that you'll also be looking into getting financing through a condominium lender or bank. Before making any final decisions on where to take out your loan, check out this list of the most frequently asked questions about condominium lending, along with answers from lending experts. Read on to find out more.

How Long Does it Take for FHA?

The FHA is different from other types of loans because they have specific guidelines, and some of them are time-sensitive. These loans take slightly longer to process than conventional loans. The amount of time needed will depend on whether you’re applying for a new loan or refinancing an existing one.

Does “Delivered” Mean Closed?

Here's what happens after your loan application is approved and you sign documents at a closing agent. From there, lenders deliver loans to agencies, disbursing funds to borrowers. The entire process usually takes one week or less. In rare cases, it can take longer if there are problems on either end of a transaction.

How is Significant Deferred Maintenance Determined?

Many pieces of information may be used to determine if there's deferred maintenance, including Appraisal, HOA meeting minutes, Google search, HOA budget. When determining whether a significant amount of deferred maintenance exists in a building, inspectors look at things like roof life expectancy, energy system components, e.g., HVAC, quality of fixtures, and other common elements and overall condition.

How Can You Find Out Repairs Have Been Requested?

Knowing who to contact for repair requests is essential when purchasing a condominium. You need to know who you must send your request through and where to send it. The seller must provide you with that information as part of the sales contract. If not, ask them if they can point you in the right direction.

Is There a Specific Age of Building That Won't Need the Extra Scrutiny?

No, most lending institutions will inspect all condominium properties. There are several reasons for this, but it's mainly due to advances in building materials that have emerged in the past few years. It's also important to note that some condos built before 1991 may require additional scrutiny depending on location and area. If you have a property from before then, be sure to ask your lender if it's worth it or not.

Who Determines If the Repairs Affect the Habitability of the Project?

If any part of the project can't be lived in/occupied by residents/owners, that will certainly impact the habitability of the project. In most cases, it is up to your HOA or condo association. Sometimes, they can request an inspection from a third party before deciding whether to make repairs.

How Can You Get Fannie/Freddie Announcements?

The announcements are released/linked in the credit policy posts when any lender letters from either agency are released. There are several ways. You can check Fannie Mae’s and Freddie Mac’s websites or follow them on Twitter. They also send emails and announce when they're issuing something new or revising a previously published statement.

If Classified As Unavailable, Does Fannie Follow Up to See if the Situation Has Been Rectified?

Fannie will not follow up on an "unavailable" condo project- documentation that supports the project is now eligible. For example, confirmation that all repairs have been completed would need to be submitted directly to FNMA for review to reverse the unavailable status.

If One Building in a Multi-Unit Condo isn’t Habitable, Is the Whole Complex Not Eligible?

If there are multiple buildings and there's an issue with any of the buildings, the whole project would be determined to be ineligible/non-warrantable.

If we currently have a project approved in our condo database sometime in 2023, does that mean we would require additional docs to satisfy these new conditions/guidelines set, or would it be somewhat grandfathered with that approval?

If there's a current approval- the lender would first leverage an internet search, appraisal, and any other documents that may be supplied or historically in the database to determine any possible issues for a currently approved project. If nothing applies to these new guidelines, additional information may be required.

Is There a List of the Municipalities in Florida Doing the 40-Year Inspections?

We believe that the 40-year recertification is applicable state-wide. However, you can contact a lending officer to help you confirm if this is applicable in your location.

Do Deferred Maintenance / Unsafe Conditions Apply to Coops?

These new guidelines are currently specific to condos. However, if a co-op project did have unsafe conditions present, that would be an issue the lender would need to address as part of their co-op review.

Is There An Easy Way To Find Out If the Property Has Deferred Maintenance?

If the transaction is a purchase- the seller (as the current unit owner) would know about any deferred maintenance (they would have access to HOA meeting information where deferred maintenance would be discussed). For a refinance, the borrower would know this information.

Do You Anticipate Any Specific Length of Time That This Research, Going Back and Fortah With Additional Info To Evaluate Will Add to the Approval Timeline?

Some condo departments don't anticipate their turn times getting pushed out with this additional requirement. However, if they require additional information from an HOA, timelines may get pushed out if they don't supply information for review on time.

What About Condos Grandfathered in Under Previous Zoning or Building Requirements?

These guidelines are geared more towards ongoing maintenance of buildings and if an HOA has "pushed off" regular repairs vs. any zoning requirements. The only time building code requirements come into play is if an HOA has delayed repairs, and that delay causes issues meeting building codes.

Where Do We Find the Updated Condo Q?

The updated condo questionnaire is on the intranet under the Condo/PUD page.

What Docs Do You Need for the Pre-Review?

It would just have to be a project-level document (a Questionnaire, Master Insurance, or a Budget for the current fiscal year). The lender will look at litigation, too, which would require a copy of the complaint. So, if there's a project-level document that may have a known issue, the lender will look at it for a Pre-Review.

How Long is the Pre-Review Approval Good for?

The Pre-Review is high-level feedback for your loan. It's not a guarantee of acceptance (that is determined by the Reviewer staff). However, it can offer "peace of mind" before submitting the application and being subjected to any borrower fees.

Is There a Quick Way to Find Out if a Condo is Warrantable Before Going Under Contract and Finding Out In Condo Review?

Leveraging any information that the seller has/provides is an initial way to get information. However, a condo questionnaire does provide the most/best information for review.

Bottom Line

The process of condo lending can be intimidating for some home buyers, especially if you’re not familiar with the process or the terminology that comes along with it. It's imperative to educate yourself more about the ins and outs of condo lending from start to finish, including how to get approved as a buyer, what documents are involved in the process, and more. This will help you make an informed decision and choose the right path.

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