Big Changes for Condo Lending

Big Changes for Condo Lending

When you buy  a condo, another level of condo lending approval is needed. We not only have to get the borrower approved, but also ensure the condo meets Fannie Mae guidelines. There are some new changes in the condo approval process – some that will make getting a condo approved easier, and some that will make it more difficult. Today I am going to focus on one that is making the condo approval process more challenging.

Several weeks ago we had a client who wanted to buy a condo in Washington, D.C. The listing and the contract did not disclose that there was a special assessment to fix code violations, modernize the elevators, and repair the balconies and the parking structure ramp deck. We need to get a condo questionnaire filled out by the management company for condo projects over 10 units. The form asks whether there are special assessments and what they are for, so that is how we discovered there was one. It took many days of unanswered questions to finally find out what the special assessment was for and that the work was still in process.

Fannie Mae now requires that, if there is a special assessment for critical repairs (defined as elevators, balconies, waterproofing, foundations, electrical systems, and parking structures), the work must be completed. We also need to get evidence from the licensed contractor or structural engineer that the work was done. A letter from the management company is not enough.

In my client’s case, the work was not completed, so she was unable to buy this condo. Fortunately, the sellers had already moved out, so the unit was empty. They allowed her to rent the unit while we were waiting for the work to be completed, and then she could purchase it. So, in this case, we dealt with a lot of stress as we gathered more information, but we had a happy ending!

There are some changes to condo approval that will make buying a condo easier, and I will share them with you next week. If you are interested in buying a condo and would like to learn more, please contact us.