Happy Thursday – I hope you are doing well. For this week’s video, I want to discuss the lending challenges we are seeing on condos. If you are a buyer or seller for a condo or a listing or buyer’s agent for a condo, please take the time to watch or read this.
Anytime you buy a condo, the lender has to get an approval through a system called CPM (Condo Project Manager). In the past, not all lenders did this but as of last year, Fannie requires this approval on all mortgages for condos. Based on this we are starting to see condos that used to be approved no longer getting approvals. If this is the case, you cannot get traditional financing and will have to look for a mortgage for a non-warrantable condo. The mortgages for non-warrantable condos have a higher rate and are not easy to get approved. We do have access to these products if needed but if you are a seller or listing agent, I suggest you reach out to your preferred lender prior to listing the property so you know this up front. There are also cases where we can investigate this for the seller and see why Fannie is not approving the condo and potentially get this fixed. This process is not always fast depending on the issue with the condo.
The second issue we are seeing is the HOA not having the proper deductible on their insurance. Fannie requires a 5% deductible on the master HOI policy, and we are seeing condos that don’t have this. If this is the case, the HOA needs to update their insurance to meet Fannie Mae Guidelines. If they are not willing to do this, we do have a work around but need to know about this as soon as possible. So, if you are a seller or listing agent, you should get the condo insurance before you list the property and let your preferred lender review this prior to listing the home.
Also, if you are a buyer or buyer’s agent for a condo, you should add a stipulation to the contract that states the buyer gets their earnest money back if the condo is not approved for some reason. We have a sample stipulation from a local attorney we’d be happy to share if needed. This will protect your buyer if the condo has issues outside of their control.
As always, please call me if you would like to discuss in more detail.
Stewart Sadler
Managing Partner
Cornerstone Mortgage Group
Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938
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