Even though buying a condominium is a lot like purchasing a single-family home there are differences when it comes to lending practices. Not only do lenders look at your credit worthiness but the health of the entire complex or development into which you’re buying.
Most homebuyers use conforming mortgage financing when purchasing a condominium. This means that their loan is purchase by one of the two major government entities, Fannie Mae or Freddie Mac. They use the term warrantable to describe condo projects and properties to which will allow a mortgage. Those that don’t meet their standards are known as non-warrantable. These types of condominiums are more challenging to finance.
Lenders look for a warrantable condo if no single entity owns more than 10% of the units, at least 51% of the units are owner-occupied, fewer than 50% of the units are in arrears with their Association or condo dues, the homeowners association is not named in any current lawsuits and the commercial space accounts for 25% or less of the total building space.
All non-warrantable properties would include timeshares, fractional ownership or other projects which require owners to join an organization such as a golf membership.
When buying a condo in Panama City Beach you want to talk to your real estate agent and lender about the buildings warrantability before making an offer. If the condo is warrantable, it may allow you to get lower mortgage rates because there’s lower risk for the lender.
If you’re planning on a VA or FHA loan these are also government-backed mortgages and they are known for their flexible lending guidelines, a little more than conforming mortgage lending. However, FHA and VA also have a list of approved communities and they may not fit within the guidelines of what you are looking for. However, there are different rules to help borrowers become qualified such as the borrower must meet standard FHA guidelines, at least half the project’s units must be owner-occupied and if it is a complex, at least 70% of the units must be sold already.
So what happens if you want a condo in a non-warrantable complex?
You’ll have to talk with a specialty lender that deal specifically with non-warrantable condominiums or buildings. There are different options but they are definitely fewer and far between.
For more information or to get a list of all of the warrantable condo buildings in Panama City Beach contact our office today.
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