Condo financing

16 Replies

Hello to the bigger pockets community. I am in the process of buying a condo in the Coral Springs,  FL area. I spent time looking for the condo got pre-approved by my lender. At last minute my lender informed me that they would not lend money to a community that is 15% or more of rentals. I was counting with a 20% down payment but the another lender I reached out is asking 25%. I don't want to do, I simply don't have 25% what would you guys recommend? Is this common practice? 


Unfortunately I don't know, but I'm very interested in the answer.  I'm looking into buying a condo or two myself and am interested in learning the details of how financing works...

@John Alba

Keep shopping, there are lots of lenders out there. Just keep calling different ones until you find one that will do it. Be sure to tell them up front about the % of rentals so you don't waste your time.

You'll find one, just keep on looking.

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@John Alba Are you buy as owner occupy or investment? Is the condo warrantable? Has your lender ordered a Condo Questionnaire and reviewed it?

Buying condo's is very tricky, since the financing options will depend on the warrantablity of the condo. Many factors can make a condo non-warrantable and restrict your loan options.

@John Alba , did you get an answer?  I just ran into this exact same problem today, but we weren't even given the choice to put more down.  I'm calling a couple other banks tomorrow, but just thought I'd see what you came up with.

@Bryan Weschler Conventional financing (Fannie, Freddie, FHA, VA, USDA) for a condo requires that the condo (meaning the condo association) be warrantable. There are many different nuances so I am not going to get into every one, and there are some differences between the agencies. Some elements that will make a condo non-warrantable are:

* High investor ratio

* Insufficient reserves/Bad financials

* Litigation

* Buying as investment vs primary/2nd

When the condo is deemed non-warrantable for the specific transaction, then the only financing option left is a non-warrantable condo portfolio loan.

Hope this helps.

Preston, does your company finance non-warrantable condos in Arizona? If so, is financing only available to owner occupants or is it also available to investors? Also, if financing is available, at what LTV and interest rate?

I ask because I have noticed some condos for sale where it is specified that the buyer must pay all cash without financing.  These are condos in which a majority of units are investor owned.

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As mentioned above by a few people, the owner occupancy percentage makes it conforming or not conforming(meaning, it satisfies Fannie/Freddie guidelines).  I ran into this same situation when I was purchasing an investment condo in Minneapolis.  I was able to get around this requirement by going non-conventional (either portfolio lender or commercial lender).  I would do my best to find a local bank that will not attempt to sell off the mortgage to Fannie or Freddie.  If it's a good deal and the finances make sense, a portfolio lender and/or commercial lender would be more than happy to fund the deal.  Hope this helps.

It means the association has let their FHA status expire and they need to start from square one to get re-approved. The association management will need to start the application process with FHA, go through the inspections and pass to get certified again.

It is common.  I am my condo Board President, and we are about 1/3 rented out.  So, some buyers get angry with us for that exact reason.  Well, the sellers do too.  Their position is that their pool of buyers is small.  The association's position is that the complex is 40 years old, and sorry, and it is what it is, and try to find a cash buyer.  

If you have any questions about rentals, management, and how that works with associations, please feel free to message me.