Financing a condo has a rep for being challenging. The most notorious hurdle is how the number of condo units owned by investors impacts the loan. What if I told you this legendary deterrent is a myth?
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How Many Investors Own Condos Does Not Matter (typically)
Looking to purchase/finance a condo as a primary residence or vacation home? I have great news! There is no need to tally how many units are rented out in the condo project. The concentration of investors in a condo project does NOT matter on primary or second home condo purchases.
However, investors buying a condo and rent it out are not quite as lucky. When a condo will be a rental property the number of rental units in the condo project DOES MATTER. Mortgage companies believe when a single condo project has “too many” rental condos the project becomes saturated. The point of saturation is 50% of all condos as rentals. When more than 50% of the all condos in the project are already rented the lender considers that project saturated. As a result, they will allow another rental condo to be financed.
However, when you purchase a condo as a primary residence or a vacation home investor concentration does not matter.
What Else Matters When Financing a Condo?
Financing an Arizona condo is different from financing a single family home, townhome or patio home. Lenders must evaluate a condo project to ensure it meets Condo financing rules. Condo financing rules are not one size fits all. For example, FHA, VA, Conventional limited review, Conventional full/cpm review, USDA, Florida Condos, Resort area condos all have different requirements. However, some common focus points for all condo review types are:
- HOA lates
- Master insurance policy coverage
- Completion of a project
- Pending litigation
- Commercial usage space
- Number of units owned by one entity
- HOA budget related items
Financing a condo is not as scary as many think. Instead, buying a condo requires a bit more education.
By Jeremy House