Changes to condo loan guidelines from Fannie and Freddie that just took affect are starting to have an impact on loan approvals.
Change #1- On January 1st of this year Freddie Mac and Fannie Mae implemented new guidelines for the underwriting of condo buildings. Fannie’s tighter loan requirements post-Surfside collapse started Jan. 1; Freddie’s start Feb. 28.
Change #2- Beginning April 1st, 2022, pricing for second home, investor high balance loans will be more expensive. Loans with higher loan to values, over 70% will be subject to higher interest rates for any Fannie or Freddie backed loan. The good news is that you can still obtain financing through non-warrantable or portfolio loans, see below.
What you need to know
What does tougher underwriting guidelines mean?
Beginning Jan. 1 for Fannie and starting Feb. 28 for Freddie, these agencies are really looking at the required HOA (homeowners association) questionnaire and the budgets of the association to make sure they have enough reserves. New questions ask about the structural integrity of the community and whether any code violations are anticipated. These more direct questions will apply to any attached condominium in a community with five or more attached units. For a list of all the Fannie Mae approved condo buildings email stephen@beachwiserealestate.com.
Before the lender can issue the loan approval a questionnaire will be sent to the management company along with a request to view the budget and condo docs. The management company of the condo will be required to answer questions like these below completely:
Question: Is the HOA aware of any deficiencies related to the safety, soundness, structural integrity, or habitability of the project’s building(s)?
Question: Is it anticipated the project will, in the future, have such violations (zoning ordinances, codes, etc., which are related to safety, soundness, structural integrity or habitability)?
Answering these questions honestly or possibly with a guess could bring liability in the form of future lawsuits against HOA stakeholders, such as the property management company, board members, inspectors, engineers, and the association. The questionnaire will have to be answered completely Answering the agencies thoroughly and completely could force lenders to decline a mortgage application. (Note: Mortgage lenders fund a loan, and then may sell it to Fannie or Freddie). After what happened in South Florida, Fannie and Freddie need to dig more deeply to assess and consider condo structural risk before purchasing those mortgages from lenders. These agencies also may disqualify a condo community for other reasons, such as a lack of budget reserves.
Facts
The nation has a huge community of old condos. Sixty to seventy percent of all condo buildings are more than 30 years old with Fannie and Freddie backing nearly 70% of all condo loans in the US.
What kind of financing options are there if it does not meet Fan or Fred guidelines?
Thankfully there are other options. If your loan is denied over the Fan or Fred HOA certification answers, you may be able to get funded from lenders who do not sell the loan to an agency but services them in house. Loan programs will vary from lender to lender. Rates, loan programs and down payment requirements will vary from lender to lender.
We suggest contacting a local lender who is familiar with the local market here on the beaches that offers its own portfolio loans Chances are they have already done a thorough review of that condo building which will speed up the approval process saving you time and money in the approval process. If the condo building is not Fannie Freddie approved, they can offer you up to 85% financing for a second home and 75% for an investment loan. If you would like to speak to a local lender here on the beach that specializes in condo and condo hotel financing email stephen@beachwiserealestate.com.
Thank you for considering Beachwise Real Estate and The Tom Smith Team. We have sold over $200,000,000 and consistently ranked in the top 1% of all agents in Pinellas County. Our team’s extraordinary sales success is a result of our foundation which is built on trustworthiness, responsiveness, local market knowledge and a good reputation in the community.
We would love to know more about your real estate needs and show you how we can help you achieve your dreams of selling or buying a condo on the beach or a home in Pinellas County. We are always available to take your call.
Tom Smith 727-776-3375
Vivian Smith 727-688-7377
Kristin Vincelli 727-686-1596, download a free copy of my book
Stephen Vincelli 727-430-1995
See you on the beach!
