Financing Condo’s: One Lender’s Requirements.

February 24th, 2009 Categories: Residential and Commercial Mortgages

This is the requiremnt of a specific lender effective immediately for condo financing.  One should expect other lenders to follow suit.

The condominium must meet the criteria for Established Projects:

  • At least 90% of the total units have been sold and recorded, and
  • Control of the HOA has been turned over to the unit owners, and
  • The project or conversion is complete and not subject to additional phasing or annexation.

In addition to meeting the Established Project criteria, the condominium must meet the following eligibility requirements:

  • The LTV/LCTV does not exceed 80% for Primary Residences and 75% for Second Homes.
  • The Condominium Project can not exceed 7 stories.
  • The project does not have common areas or recreational facilities leased to or by the HOA.
  • There is no litigation pending with regard to the project or HOA with respect to safety, structural soundess, or habilitiy of the property or adversely affect the financial solvency of the HOA.
  • HOA must waive its “right of first refusal” to the sale, lease or transfer of a unit in case of foreclosure or deed in lieu.
  • Commercial use within the project can not exceed 20% of the total square footage for the project and compatible with residential use.
  • No more than 15% of total units are delinquent on their HOA dues by more than 30 days.
  • The project is not an ineligible project, such as being subject to inclusionary zoning, being a condo-hotel or timeshare, having rental programs, multi-dwelling units, manufactured homes or houseboats.
  • The HOA maintains “master” or “blanket” type of insurance covering all general and limited common elements with:
    • 100% replacement cost of project facilities, including individual units.
    • Maximum deductible is 5% of face amount of policy.
    • General liability coverage of $1,000,000 for bodily injury and property damage for entire project for any single occurence.
    • Flood insurance, current coverage, if applicable.
    • Fidelity bond is required for any project with more than 20 units (coverage equal to the total monthly assessment of HOA dues for all units times 3 months).

These requirements may appear a little dicey but they are basically the same as they were about 10 years ago.

Your comments are welcomed.

This entry was posted on Tuesday, February 24th, 2009 at 12:49 pm and is filed under Residential and Commercial Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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