Any lenders for condos with HOA litigation?

13 Replies

Hello,

I recently purchased a condo with cash and am looking for a lender for Sacramento area. HOA is in litigation with the builder for the common area.

Thank you. 

Why would you buy in HOA?

Joe Gore

i bought the condo w hoa litigation bc i was able to get it cheaper. I am ok with current loans but would like to convert to a 30 yr mortgage and invest in others. 

Hi Ethan,

There's a way to get around it. Instead of doing a cash-out refinance, go to a bank and ask for a HELOC on the condo. A HELOC is being treated like a credit card so the bank will not do a condo cert. Without the condo cert, the lender will not know the complex is in litigation. Interest rates on the HELOC are around 4%. I was able to do this for 3 of my condos. Works like a charm. 70% LTV on investment property. 80% LTV on primary.

Good luck.  

It's going to be tough finding one.. Were you able to get title insurance on the property?

Originally posted by @Minh L.:

Hi Ethan,

There's a way to get around it. Instead of doing a cash-out refinance, go to a bank and ask for a HELOC on the condo. A HELOC is being treated like a credit card so the bank will not do a condo cert. Without the condo cert, the lender will not know the complex is in litigation. Interest rates on the HELOC are around 4%. I was able to do this for 3 of my condos. Works like a charm. 70% LTV on investment property. 80% LTV on primary.

Good luck.  

 thank you for the information. minh 

 i havent tried to get title insurance yet. 

Ethan,

Keep it simple. Walk into a bank. Tell them you have a free and clear property. You want to get a HELOC on it. They will tell you what they need. You bring in the required docs, and they will give you a loan. It's totally free. Let the lender worry about the title insurance. It's their collateral. They will do what needed to protect their collateral.

Good luck. 

cool thank you

Hello, 

I have some clients interested in buying a condo that's HOA is under litigation in the greater Sacramento area. It will be owner occupied and not an investment property, at least right now. Came across this post and was hoping someone had some recommendations of LO's or programs that could get them into the property. I have found one LO that has a program that requires 10% down but my client was hoping to put a little less down since she has excellent credit (~790) and great debt to income ratios. Any help would be greatly appreciated!

Thank you! 

Ryan

@Stephanie Irto Yes, the HOA was suing the 3 builders of the community for various manufacturing defects. 1 of the builders has settled and the other 2 haven't reached an agreement yet.

@Ryan Moyer   I work with lenders that will lend on condos in minor litigation according to Fannie Mae guidelines, but I suppose that would depend on whether the manufacturing defects have already been repaired and they are just trying to recoup money?

This is the general guideline:

Construction defect litigation in which the HOA is the plaintiff are not considered a minor matter unless the HOA is seeking recovery of funds for issues that have already been remediated, repaired, or replaced. In addition, there is no anticipated material adverse impact to the HOA if the funds are not recovered.

Otherwise most non-warrantable condo loans won't go too high on LTV because of the added risk.

Originally posted by @Ryan Moyer :

Hello, 

I have some clients interested in buying a condo that's HOA is under litigation in the greater Sacramento area. It will be owner occupied and not an investment property, at least right now. Came across this post and was hoping someone had some recommendations of LO's or programs that could get them into the property. I have found one LO that has a program that requires 10% down but my client was hoping to put a little less down since she has excellent credit (~790) and great debt to income ratios. Any help would be greatly appreciated!

Thank you! 

Ryan

 Hey Ryan

With manufacturing defects, lenders won't touch it; especially with less than 10% down.

Stephanie

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