More Financing Options for Non-Warrantable Condominiums
This is a follow up to my article from yesterday Financing Non-Warrantable Condominiums. Today's article will focus on the tougher-to-finance units.
When a condominium project cannot meet FHA’s, Fannie Mae’s, Freddie Mac’s for the VA’s guidelines, financing because extremely difficult. These units are referred to as “non-warrantable” and many different facets of a condominium project can lead to this determination.
If none of the options from yesterday were able to create a solution to the financing issues, options become very limited but they do exist.
Check with Local Banks
Because local banks are regionalized and shareholders often look for niche areas in which to lend, small local banks may provide financing options for more difficult condominiums.
For example, here in Connecticut, Rockville Bank, will provide financing for select condominium projects despite the existence of a leasehold estate. There are local banks that will provide financing for non-warrantable units provided the project meets their risk threshold.
None or All of the Above
If the above efforts have been exhausted, there are still financing programs available. I found Bart Gabe on ActiveRain and had a very lengthy conversation with him about his out-of-the-box financing options. You can visit his website bartprequalifies.com. He works with two lenders that finance non-warrantable condos.
Please keep in mind these types of condominiums have been labeled as being beyond the risk threshold of Fannie, Freddie, FHA and the VA. The terms of these loans will not look like financing provided by these entities.
One lender that Bart mentioned offered financing for non-warrantables at 80% maximum loan-to-value (LTV) and requires that the borrower have 12 months of mortgage payments (PITI) in reserves. For condo-hotels, the maximum LTV is 75%. Of course the borrower would have to meet other qualifying criteria.
The second lender does not have the PITI reserve requirement but the maximum LTV is 60%. For either of these, I didn’t inquire about the potential interest rates because the rate is irrelevant. The bottom line is that the unit can be financed and the borrower would have to determine if the financing options meet his/her financial goals.
Many of the condominium projects with whom I speak that cannot get FHA approved, don’t “miss it” by much. Often it is due to excessive investor concentration which creates a catch-22: the investor concentration needs to be lowered by selling the units to owner-occupants but the units can’t sell because the investor concentration is too high!
Non-warrantable condominium financing could provide a solution to this problem by providing financing options for the units in the short-term until the composition of the project changes to the point where FHA or Fannie Mae financing options become available.
Image courtesy of Stuart Miles/freedigitalphotos.net
The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA. We have assisted nearly 200 condominiums and we can help your association.
ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.
Please contact us with any questions regarding FHA or VA condominium project approvals. You can email me at firstname.lastname@example.org or call me at 404-433-4565. I will be happy to answer any of your questions.
FHA/VA Condo Approval Specialist
404-433-4565 Cell Phone
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Check out our article in Common Interest magazine on page 19!