Questions about Crested Butte condominium financing are some of the most common questions I receive from buyers. While I certainly know the basics, in the end I refer buyers to one of the many qualified mortgage brokers in the valley. Guest blogger Michelle Phelps is one such resource, and was kind enough to share the following information with my readers:
Crested Butte Condominium Financing
While mortgage lending has gotten somewhat easier in the past few years, even with all of the new regulations, one area of lending is still tougher than others – condominium loans.
Why are condo loans still harder to obtain than loans on other types of properties? The answer lies in looking back to the underwriting errors of the mortgage meltdown. Many lenders did not verify any information on a condo association on purchase loans that had a 10% or more down payment. This means that many HOA’s may not have had reserves, they may have been poorly managed, had incorrect insurance coverages, and the majority of the complex could have been higher risk “non-owner occupied” units.
The good news is we now have more condo underwriting guidelines. Many condo associations are now managed better with higher reserves. This results in less risk to the unit owners and a variety of lending options.
The following guidelines ensure that unit owners in the association will be able to maintain the project even if several of the units are behind in HOA dues.
Some of the questions we ask on most loans would be:
- Is the HOA setting aside 10% of its revenue for future capital improvements?
This will help eliminate special assessments in the future to unit owners - What percentage of the project is owner-occupied (primary or second homes)?
At least 50% for FHA and 51% for people purchasing an investment property - Does the HOA carry the appropriate insurance coverages?
To verify the HOA can cover any damages to the structure and rebuild if necessary - How many unit owners have delinquent dues or are in foreclosure?
If too many owners cannot pay dues, the HOA could become insolvent
Contrary to past beliefs, we have loan options available for the following condo projects:
• Short-term rentals and “Condotels”
• Large percentage of non-owner occupied units
• Projects with litigation and leaseholds
The key to financing condo units is to choose a local lender who is familiar with condo projects. I have been in the mortgage industry for 20 years of which all have been in rural mountain resort areas consisting of a majority of condos. At Bay Equity we are a lender and have investors that support the condo industry. We have the resources to show you what options are available.
Michelle Phelps can be reached at (970) 642-3477 or phelps@fidelitymtg.com
