Posts Tagged ‘portfolio loans’Posted on: May 23rd, 2012 No Comments
The housing recession forced lenders and loan insurers to reassess how they deal with risk. Nowhere is that more glaring than condominium financing. To reduce the chance that these loans defaulted in the future, lenders tightened their standards considerably for condos.
There are two primary ways to get financing for condos: 1) an FHA backed loan, or 2) conventional financing. In order to qualify for an FHA-backed loan, the condomium association must first apply for and receive FHA approval for the entire condominium. Factors that may disqualify a condominium from FHA approval are numerous delinquencies, low reserves, and a high percentage of investor ownership. Some estimates show that fewer than 25% of condominiums nationwide currently qualify for FHA financing. The FHA recently announced it is preparing to change its rules so that more condominiums will qualify. To see if a condominium you’re interested in qualifies for FHA backing, check out this link.
Conventional financing often involves meeting the underwriting requirements of FNMA (Fannie Mae) and FHLMC (Freddie Mac), the two biggest buyers of mortgages in the secondary market. Unfortunately, they have most of the same condo qualification requirement as the FHA. However, some banks and credit unions will consider condo purchases on an individual basis with many keeping the loans as “portfolio loans”.
Condo financing rules change like the seasons. If you’re considering purchasing a condo, it’s best that you contact a lender and have them bring you up to speed on all your financing options.