Palo Alto, CA · Member since 2014 · 104 posts · 14 votes
We are looking to bid on a townhome but found out that more than 50% is rented out. My mortgage broker says we will end up paying a lot more interest rate if that is the case. Is that true?
We are under a tight deadline so any help would be much appreciated.
Possibly true. Talk directly to the HOA manager. Speak with other lenders. Most lenders answer questions, but not always correctly. I have about 6 HOA properties.
Royal Oak, MI · Member since 2015 · 57 posts · 26 votes
11y
I'm not sure about the rate changing but the HOA may have a limit of what percentage of units can be rentals. You should be able to request a copy of the associations by-laws and documents to check what their rules are on this.
Investor · Minneapolis, MN · Member since 2012 · 187 posts · 117 votes
11y
Fannie Mae and Freddie Mac based loans will not allow more than 40% or 50% of the HOA units to be rentals. Mortgage brokers can't set up the mortgage and then sell the note to the government.
Therefore , they have to find other bankers willing to buy the note. Most banks will not borrow on these. Sometimes its more like a commercial loan with short 5 year term and higher interest rates.
Rental Property Investor · Liberty Hill, TX · Member since 2014 · 285 posts · 166 votes
11y
@Marc Jolicoeur that is correct Fannie and Freddie will not touch units with HOA's exceeding that percentage rentals. You will need to find a lender who will portfolio your loan or a private lender. Either way you will likely pay more interest.
Palo Alto, CA · Member since 2014 · 104 posts · 14 votes
11y
Thanks for the inputs. Do you know how much more typically the rate is. I do plan to call some local brokers here but not sure if they give me accurate information.