Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Is The Condominium You Want Warrantable?

Make Sure Your Condominium is Warrantable

Make Sure Your Condominium is Warrantable

Orange County, CA – Purchasing a condominium is a very different beast than buying a home. They’re an affordable option for those living in high cost areas such as Orange County or San Diego. When it comes to getting financed for a condominium, however, we have  extra hoops to jump through. The main difference is that a condominium complex must be approved for financing, not just you.

 

The technical term is ‘warrantable’. That’s the word the investors use to describe a condominium that they’re comfortable lending money on.  A non-warrantable condo will be significantly more difficult (or downright impossible) to get a mortgage for. So what makes a condo non-warrantable?

 

Lawsuits

If there’s any kind of lawsuit on the property other than foreclosure or property liability suits, it can quickly bring the underwriter’s pen down — and not in your favor. In particular, structural defect and construction litigation suits will always kill a potential mortgage. The homeowner’s association (HOA) will know of any ongoing or pending litigation, if your real estate agent does not.

 

Rental Units/Occupancy

In the case of a newly-built condo, no more than 49% of the units can be designated for rental. The remaining 51% must be primary or secondary residences. We also need to verify that one entity does not own more than 10% of the units.

 

Mortgage Defaults

When a condominium owner is struggling financially they may get behind on their HOA dues. HOA dues are required to keep the property in good condition, physically and financially. If 15% of owners are delinquent on these dues, then it can be cause for the loan to be declined.

 

Insurance

The insurance coverages held by the HOA are really important as well. The underwriter will verify that the proper Hazard, Liability, Fidelity, Flood and HO-6 coverages are in place where necessary.

 

Project Status

A project that is less than 90% complete or has not yet been turned over to the HOA in non-warrantable. These projects require a different loan program.

 

A down payment of 20% or more can streamline the process. Instead of a full project review we can offer a limited review. A limited review gives more leeway to the project. For instance, with a limited review we can ignore the mortgage defaults and the occupancy requirements.

 

Still not sure whether a particular condo is the right investment for you?  At PrimeLending we have a dedicated condo department that is solely responsible for reviewing and approving condominium developments. Call us and we can quickly and easily help you determine if a condominium is eligible and we’ll work with you to make sure you’re making the right decision.

Scott Storace

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