Financing an investment condo with less than 50% owner occupancy

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Financing an investment condo with less than 50% owner occupancy

Shalabh Jain
Investor · Sammamish WA · Member since 2016 · 11 posts · 0 votes

I am looking to finance an investment property (condo) purchase in Washington State. 

My offer is accepted and now I get to know that owner occupancy is less than 50%

Can anyone suggest any lender who would finance such a property ?

Thanks !

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Richard Scholtz
Lender · Greater Seattle Area, WA · Member since 2015 · 80 posts · 57 votes
10y

Hello @Shalabh Jain

That is standard FNMA guideline. They do not want condos that are 100%  rental units with a lot of H.O.A. dues past due so the buildings cannot pay for upkeep and all get turned into meth labs. The FNMA condo guidelines are all here  https://www.fanniemae.com/singlefamily/project-eli...

Condo projects and properties which don't meet Fannie Mae and Freddie Mac warrantability standards are known as non-warrantable.

Non-warrantable condos are more challenging to borrow against.

Typically, a condo is considered warrantable if:

  • No single entity owns more than 10% of the units in a project, including the developer
  • At least 51% of the units are owner-occupied
  • Fewer than 15% of the units are in arrears with their association dues
  • There is no litigation in which the homeowners association (HOA) is named
  • Commercial space accounts is 25 percent or less of the total building square footage

What  you want is lender that will lend on NON warrantable condo project. 

There are bunch of PORTFOLIO lenders that do NOT sell their loans to FNMA. They can and will lend on such projects and rates and term are not that much different. Your large down payment meets their requirements.

Reach out if you want those details.....your problem is not a problem

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  • Patrick Gutierrez
    Flipper · Miami Florida · Member since 2016 · 14 posts · 2 votes
    10y

    What part of Wa?

    0Reply
  • Shalabh Jain
    OP
    Investor · Sammamish WA · Member since 2016 · 11 posts · 0 votes
    10y

    Its in Kirkland, Washington.

    My lender refused with even 25%+ down.

    0Reply
  • Shalabh Jain
    OP
    Investor · Sammamish WA · Member since 2016 · 11 posts · 0 votes
    10y

    I showed the lender, enough fund for upto 30% down payment.

    I also offered to show regular income that will make the monthly payments.

    but he has refused all that. just sticking to "we want 50%+ owner occupancy ratio"

    0Reply
  • Richard Scholtz
    Lender · Greater Seattle Area, WA · Member since 2015 · 80 posts · 57 votes
    10y

    Hello @Shalabh Jain

    That is standard FNMA guideline. They do not want condos that are 100%  rental units with a lot of H.O.A. dues past due so the buildings cannot pay for upkeep and all get turned into meth labs. The FNMA condo guidelines are all here  https://www.fanniemae.com/singlefamily/project-eli...

    Condo projects and properties which don't meet Fannie Mae and Freddie Mac warrantability standards are known as non-warrantable.

    Non-warrantable condos are more challenging to borrow against.

    Typically, a condo is considered warrantable if:

    • No single entity owns more than 10% of the units in a project, including the developer
    • At least 51% of the units are owner-occupied
    • Fewer than 15% of the units are in arrears with their association dues
    • There is no litigation in which the homeowners association (HOA) is named
    • Commercial space accounts is 25 percent or less of the total building square footage

    What  you want is lender that will lend on NON warrantable condo project. 

    There are bunch of PORTFOLIO lenders that do NOT sell their loans to FNMA. They can and will lend on such projects and rates and term are not that much different. Your large down payment meets their requirements.

    Reach out if you want those details.....your problem is not a problem

    2Reply
  • Shalabh Jain
    OP
    Investor · Sammamish WA · Member since 2016 · 11 posts · 0 votes
    10y

    Hello Richard, 

    That is a very comprehensive answer. Highly appreciate your response.

    I will get in touch if i need anything.

    0Reply
  • John Broussard
    Lender · Houston, TX · Member since 2008 · 252 posts · 60 votes
    10y

    You may want to search some Non Prime Lenders, they will lend on Non Warrantable Condo's. Not sure who will do it in your state but we do.

    0Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    Local credit unions may be a good source of non-warrantable loans. There are a few in my area that do them

    0Reply
  • Lillian Sun
    Investor · Allston, MA · Member since 2017 · 4 posts · 0 votes
    9y

    I have two investment condos in Boston, MA. Want to refi to take some cash out. Now I have this problem to find a lender who will refi a condo with low owner occupancy ratio. Anybody knows any lender who would fund such condo in MA? Thanks in advance. 

    0Reply
  • Justin Kill
    Real Estate Agent · Reno, NV · Member since 2016 · 19 posts · 3 votes
    9y

    This may not help in this exact situation but FHA guidelines actually just went down to 35% provided other requirements from my understanding. I am not that familiar with the exacts so it would probably be best to talk to a lender. Also, the condo has to go through some re-certification process from my understanding though.

    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    9y
    Shalabh Jain I would reach out to a local broker in your area that is approved with many different lenders. You will need a non warrantable condo loan or a portfolio loan. Let a broker shop this out for you and save yourself some time.
    C2 Financial
    WebsiteView Page
    0Reply
  • Dash Siva
    Investor · San ramon, CA · Member since 2011 · 145 posts · 33 votes
    9y

    @Shalabh Jain I have been in a similar situation for a cash out refi where the owner occupancy levels did not meet Fannie/Freddie requirements. As has been mentioned the key is finding an institution that's going to keep the loan in their portfolio. It took me a few dozen calls locally, but finally I was able to find a local credit union to fund the deal. Persistence pays..

    Good luck and let us know how you go!

    Dash

    0Reply
  • Rhonda Crockett
    Accokeek, MD · Member since 2017 · 13 posts · 3 votes
    9y

    I just experienced this!!! Approved but Fannie Mae will not back because more than 50% units investment properties... I never knew about this..

    0Reply
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