March 29th, 2018 12:42 PM by Robin Bain
Buying a condo is a lot like purchasing a "regular" home, but with one big difference -- mortgages are tougher to come by.
Lenders impose a different set of rules on you when you buy a condo. They may sometimes increase your interest rate.
With condos and co-ops, it’s not just your creditworthiness the lender has to worry about. It must also verify the fiscal and physical health of the entire development into which you're buying.
Conforming mortgage rules for condos
The majority of homebuyers use "conforming" mortgage financing.
This means that their loan purchased by one of two government-sponsored entities -- Fannie Mae or Freddie Mac -- and that the loan meets the two group's minimum standards.
Fannie Mae and Freddie Mac use the term "warrantable" to describe condominium projects and properties against which they'll allow a mortgage. See: https://www.fanniemae.com/content/guide/selling/b4/2.1/01.html
Condo projects and properties which don't meet Fannie Mae and Freddie Mac warrantability standards are known as non-warrantable.
Non-warrantable condos are more challenging to finance.
Typically, a condo is considered warrantable if:
Common non-warrantable properties include condotels, time shares, fractional ownership properties, and other projects which require owners to join an organization, such as a golf club.
Manufactured housing projects and other developments which are not legally considered real estate are also excluded from warrantability. These include house boat and motorhome projects.
When buying a condo, ask your real estate agent or lender about the building's warrantability before you go any further.
A warrantable condo typically gets you lower mortgage rates than a non-warrantable condo. Warrantable condos create lower risk for the bank.
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PREMIERE MORTGAGE SERVICES INC. 11 Malvern Hill Rd Sterling, MA 01564-2829
Massachusetts License Number Broker MB1498
Dana Bain NMLS #18693
Robin Dunbar Bain NMLS #18699
Licensed by the State of New Hampshire Banking Department- License Number 5430-MBR Premiere Mortgage Services Inc. NMLS #1498 is a licensed broker and not a lender. We arrange but do not make loans.