HEADS UP TO ALL CONDO HOMEOWNERS! Especially ones in the banking business that can vouch for what we are sharing! For years we have urged home owners to be active within their master and condominium associations. Add knowing that your prospective buyer will be able to acquire financing is one more reason to be involved!!

Every day there seems to be a new rule or guideline on the mortgage end that creates another road block in getting qualified buyers approved! It seems there are fewer and fewer banks that are able to keep loans in house. In today’s economy selling the loans to the secondary market appears to be the way to do business.  Additionally, even banks that keep their mortgages underwrite to Fannie and Freddie guidelines. 

Understandably there are a lot of bad loans on the books and everyone wants that practice to end! However we’re experiencing a swing of over compensating—particularly in the financing of condos. Hidden Valley and Seven Springs Associations are both aware of the scrutiny that has recently been placed upon all associations budgets during the mortgage approval process.

Know that the property in question could be your primary residence condo or a second home condo ANYWHERE IN THE UNITED STATES.  With both Freddie and Fannie basically using the same rules here are two for you to check in with your Association Manager. DON’T wait until you’re ready to sell your place, check it out NOW!

Quoting directly from the Freddie and Fannie requirements, does your association “yearly operating budget PROVIDE AT LEAST 10% funding for replacement reserves for capital expenditures, deferred maintenance and replacement costs of major common elements?”

Keep in mind it doesn’t matter how much you have in reserves!! It just matters what you have budgeted!! If you don’t have the 10% it can result in a mortgage denial.

Question two, “Do the project documents provide for the First Mortgagee’s Rights?”  They are looking to ensure that there are “no provisions that give a unit owner or other party priority over any rights of the first mortgagee in the case of payment to the unit owner of proceeds from the termination or, insurance proceeds, or condemnation awards for losses to or a taking of units and/or common elements.”

Those of you in the financing arena should be able to share with your association manager the challenges that Freddie and Fannie have created. Understand amending project documents is a lengthy process! But if you need an amendment to be able to secure financing to sell properties within the community it is a necessary step!

Our goal is to keep you in the loop of what it takes to buy and sell property! Hopefully, this information can save you the agony of having a closing cancelled the day before settlement! The “key” to a smooth transaction is knowing what might trip you up before you begin the process!!