HOA not meeting 50% owner occupied rule - issue with financing?

5 Replies

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.

@Roy Mitle

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.


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.

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. 

@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.

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.

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