Wednesday, July 13, 2011 - Article by: Douglas Lenski - Wholesale Mortgage Services of Wisconsin -
A recent check of my web traffic alerted me to a rash of inquiries regarding the purchase of a condo in Wisconsin. Like any part of the housing market right now there are deals to be had in the condo market. There are plenty of potential pit falls and hopefully this will help you navigate the mine field.
The recent foreclosure market has turned investors sour on the condo market. You can still get financing at 80% of the condo's value. You will have to pay a premium of .75 points for the loan to value to 80% or take a .25% hit to the rate. That means on a $100,000 loan you will pay an additional $750 in closing costs. The alternative would be if you see 4.5% is the current rate for a 30 year fixed rate you could take 4.75% for your rate and avoid the fees. The other option and what the lenders seem to be pushing is putting down 25% on the property and avoiding the higher fees and the higher rate. That is what most condo buyers are choosing as their best option.
We figured out that the best option is 25% down and now we are ready for closing. No, now we have to talk about the condo association. With all the foreclosures in all areas of the housing market condos were hit just as hard. That means that some condo association dues were going unpaid and the health of the association could be in jeopardy. That means the lender is underwriting the condo project as much as they are you the borrower.
The most important item lenders will be looking at is the amount of units that are vacant or unsold as a percentage of the total number of units. Lenders will differ in the requirements but I would be confident if the project is 90% sold and occupied your financing will be approved. That does not mean that you can not get financing below 90% but it becomes more difficult and in some cases more costly.
The other area the lenders pay particular close attention to are rental units. Some condo projects do not restrict the amount of rental properties in the project. Lets face the fact that renters do not take care of properties as well as home owners. A project full of renters could bring down the value of a complex in a hurry. Most complexes have restrictions on the number of rental units for this very reason.
If your intention is to buy a condo it is very important to let your mortgage professional know this during the pre-approval process. You may want the condo association to fill out a condo questionnaire before you write an offer to make sure the condo qualifies for financing. Condos are a little more difficult to finance but not impossible. Call or email today with any questions.
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