Friday, April 10, 2009

Financing for Condominiums – FANNIE MAE GUIDELINES

Financing for condominiums has just gotten tighter. Jan 15th Fannie Mae’s tighter restrictions went into effect for condominium loans The restrictions attempt to make new condominium loans safer for investments.
Since Florida has been considered high risk, Fannie Mae will be conducting project eligibility for Florida’s new and newly converted condominium projects.
Here is a brief overview of some of the changes:
* For new and newly converted condominium projects, at least 70% of the TOTAL UNITS in the projected must be conveyed or under a bona fide contract for purchase as a principal residence or second home (which is up from 51%).
* For new and established condo projects, no more than 15% of the total units can be 30 days or more past due on the payment of their condo association fees.  Instances of delinquencies in payment of HOA dues are not unique to established projects. In the current market conditions, association dues delinquencies are occurring in some projects long before they have met all requirements to be considered “established.”
* The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.
* Borrowers must now obtain a condo-owners insurance policy unless the master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condo-owners policy, known as an HO-6 policy, covers personal property, personal liability, and the physical unit from the studs and in.
* No more than 10% of a project can be owned by a single entity.
* In addition, Fannie Mae also announced that effective April 1, 2009 it will add a fee of 0.75% of the TOTAL LOAN AMOUNT on certain mortgages secured by a condo. This fee, paid by the BORROWER would apply unless the borrower is able to come up with at least 25% of the purchase price.
If you are interested in purchasing a condominium, please be sure you are speaking with a licensed mortgage broker or bank before purchasing so you understand what is involved in the financing of a property. If you would like some contact information for a local lender in our area, please contact us and we will be more than happy to assist you.