What You Need To Know When Buying A Condo
Anytime I get a call and someone tells me that they are buying a condo I begin to cringe. The reason I cringe is because there are a lot of items that can prevent a deal from not closing and I don’t’ ever want that to happen to one of my clients. I know I say time and time again but I cannot stress this enough when it comes to condos, you MUST USE A CONDO EXPERT, PERIOD!
How do you if the person you are speaking to is a condo expert? You tell them the name of a condo you are trying to purchase and see what they say. The correct response your Mortgage Professional is that they are going to look the condo up using their resources, would like the name and number to the association to ask questions pertaining to the condo approval, and talk to you about advantages of putting 25% down on a primary residence or 30% down if it is a 2nd home in order to get a “Limited Review Approval.”
Although these measures are to help protect the bank they in turn can help protect you as a buyer. The lender wants to make sure that their collateral is going to be there in X number of years and so should you.
If you are getting an FHA loan your mortgage professional should check FHA’s Approved Condo list found at https://entp.hud.gov/idapp/html/condlook.cfm. If it is not on the list you will have to get the full condo project approved which can take up to 4-6 weeks as of right now. The condo will have to be in great financial shape and meet a lot of guidelines.
If you are you are getting a Conventional loan and do not receive the Limited Review Approval then you will have to get a full approval. It is a little easier with a Conventional loan than an FHA loan but not much.
Each bank can have their own “overlays” that need to be followed. The main items to look out for how many units are 30 days or more behind on their dues, is there any litigation, how much Fidelity Bond coverage do they have, how much do they have in reserve, amount that are owner occupied/2nd homes, and if they have a right of first refusal that can affect the mortgagee. There are many more but this should give you a good idea.