Condo Loan – Rental Ratio Non Factor

Condo Purchase - Investor Owned Does not

No, you don’t need your reading glasses.   The number of condo units owned by investors in an Arizona condo project does NOT matter as long as the buyer of the subject property/condo is buying it as a primary or secondary (“vacation”) home.  This has been viewed as one of the most difficult hurdles to overcome with regard to a condo purchase or refinance.

No More Condo Counting

If you are looking to purchase/finance a condo and you will occupy it yourself either as your primary residence or your second home your Arizona mortgage lender will not have to tally the number of units that are currently being rented out in the project that your condo is in.  The number or rental or investor owned condos is not a factor on a primary or second home condo purchase.

Now, if you are looking to buy a condo and rent it out tell your lender to get their abacus out.  If the subject property is going to be used as a rental property than the number of rental units in the condo’s project DOES MATTER.  Why do lenders care about the number of rentals in a project?   Mortgage lenders are concerned with the number of rentals in a particular condo project simply because of saturation.  Mortgage companies feel that if a particular project has “too many” condos being rented out it saturates that particular condo project making it harder to rent out additional units.  The point of saturation is 49%.   This means that if more than 49% of the units in the condo project where you are looking to purchase a condo as a RENTAL are already rented than the lender will consider that development saturated and will NOT finance any more condos that are being purchased as rentals in that particular condo project.

However, to repeat the good news above – if you are purchasing a condo as a primary residence or a second home the number of condos in the project where you are buying that are owned by investors DOES NOT MATTER!

What Else Matters When Financing a Condo?

Financing an Arizona condo is quite different from financing a single family home, townhome or patio home.  The mortgage lender providing financing for the condo must evaluate the condo project to make sure it meets Condo guidelines relative to the type of financing the buyer is using.  All in all there are over 20 different different condo approval types that a lender has at their disposal.  For example you have different condo guidelines for FHA, VA, Conventional limited review, Conventional full/cpm review, Homepath, USDA, Florida Condos, Resort area condos and so on.   In short, each of these tend to focus on some of the same major components.   Buying a condo “typically” requires that the lender review the following aspects of the project the condo is being purchased in:

1. HOA delinquencies
2. Master insurance policy coverage
3. Completion of the project
4. Pending litigation
5. Percentage of space in the project dedicated to commercial usage
6. Number of units owned by one owner
7. HOA budget related items (such as percentage of revenue dedicated to reserves)

Buying a condo while different is NOT as scary as some may lead you to think (…and some doing the leading in this direction are mortgage lenders believe it or not).  Instead, buying a condo simply requires a bit more education and that education should be provided by your Arizona Mortgage Lender directly.

If you have any condo related questions call or email us today. 

Phone: 602.435.2149  

By Jeremy House


  1. […] Arizona Lender can hinder a buyer’s ability to finance a condo by not knowing condo home loan guidelines inside and out.  For example, the misinterpretation of one simple Conventional condo financing […]

  2. […] This protects the marketability of the project.  Many loan programs require that there only be a limited number of rental condos in a project to be eligible for financing.  In addition, some HOA’s use rent restrictions to […]

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