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Cash In On the Condo Bust
But you have to be very, very careful. You want to make sure that the building has solid financial statements, they have reserves, enough insurances, etc. A lot of this is taken care of by the lender but make sure to consult a real estate expert and mortgage expert and get their thoughts on whatever you are trying to buy.
Buying A Condo
This article hits it right on the nose about buying a condo especially here in South Florida.
“Potential condominium buyers are facing a tough choice right now: new or used?
There are deals to be had on new condos, as developers heavily discount units to move inventory. But getting a mortgage is tough. Fannie Mae and Freddie Mac, the government-controlled mortgage companies, have put in place even tighter guidelines for making condo mortgages. That’s leading some developers to seek FHA approval for their buildings, as Wednesday’s WSJ story explains.
Used condos have their own financing issues. As some condo owners fall behind on mortgage payments, they’re also missing payments for condo association dues, which pushes more buildings to make up that debt by passing hefty special assessments on residents. Fannie Mae doesn’t purchase mortgages in buildings where more than 15% of owners are 30 days or more late on paying their condo dues. That means some owners can’t refinance or sell their units because their neighbors aren’t paying.”
http://blogs.wsj.com/developments/2009/06/18/anyone-want-to-buy-a-condo-anyone/
Condo’s Take On Lenders
This should come as no surprise but condo Boards are going after past due condo dues.
“As more condominium owners default on home loans, the amount of unpaid dues owed to condo associations is piling up. To collect the arrears, some condo boards have begun foreclosures on units already seized by banks. Banks that hold or service mortgages on which homeowners have defaulted don’t owe condo dues until the bank takes title of a property. In Florida, where judges must rule on foreclosures, it can take 18 months or longer from the time a homeowner stops making mortgage payments.”
How To Sell More Condos
The obvious answer from someone in the business would be to get your FHA approval. FHA released their new mortgagee letter stating that is what they are doing. We will see once lender communicate how they are going to handle this.
” A nationwide glut of new condominiums has prompted developers to use new marketing ploys to sell their units. One increasingly popular move: get a government stamp of approval for the entire building. The approval, from the Federal Housing Administration, means potential buyers can more easily qualify for a low-down-payment mortgage backed by the FHA — a highly coveted amenity in this era of tight credit.”
http://online.wsj.com/article/SB124520137545121587.html#mod=todays_us_money_and_investing
Very Important Condo Changes
There are a lot of changes to condo requirements. Below is the link for the condo changes. To summarize it, if you are buying a condo in Florida that is new or a new conversion it is going to be very hard to get financing. With established condos you will have to have “walls in” insurance coverage (separate interior policy), must be at least 51% owner occupied, cannot have more than 15% in delinquent dues, must have Fidelity Bond coverage, and loan to value changes.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0834.pdf
More Changes For Condominiums
Fannie Mae will be adding a fee of .75 percent of the loan amount on a 30-year fixed mortgage, for borrowers who put down 25 percent of the purchase price or less, effective April 1. There are other restrictive review guidelines, especially for Florida. Lenders may start implementing these changes earlier since the April 1 is a “delivered loan” date (meaning closed, funded and packaged by the lender).
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