Now the Good News about Changes to Condo Lending

Last week I wrote about recent changes to underwriting guidelines for conventional loans (Fannie and Freddie) for condominium mortgages that could make it more difficult to purchase a condominium. However, there are also some positive updates that will make it easier to get a mortgage on a condominium.

As I discussed, when buying a condo, we need to have the management company complete a questionnaire. In the past, condos in projects of 2 to 4 units were exempt from this requirement. That exemption has been expanded to include projects with 2 to 10 units. This change can save a borrower up to $350 and can streamline the approval process. This past week, we had a couple buying a condo in an 8-unit building. We were very happy to inform them that they saved time and money, and may have avoided additional challenges, by not having to get a condo questionnaire completed!

Another interesting change has to do with investor concentration in a condo project. The previous guideline was that purchasers buying a condominium unit as a rental property could not obtain a conventional mortgage if the building was over 50% non-owner-occupied. That not only limited new purchases but also meant many projects had rules limiting the number of units that could be rentals. So, if you bought a unit to live in but eventually wanted to move out and rent it, you might have to get on a waiting list until someone else in the building sold an investor unit. There is now no maximum number of investor units in established projects. Newly constructed condominiums still require a 50% maximum investor concentration for non-owner-occupied purchasers. This guideline update could open the door to more potential condominium buyers.

If you are interested in buying a condominium and would like to learn more about the Fannie Mae underwriting guideline changes, please contact me so I can send you information about our upcoming webinar on September 24.