Denver Home Living Huettner Capital Fall 2018 | Page 9

Big Changes to Condo Lending
Rules Mean Thousands Of
Dollars In Savings
If you own a condo or have thoughts
of buying one, pay attention!
L
ending guidelines for condominiums just got a lot easier, and the changes can save you thousands of dollars in interest and
loan fees. The new rules loosen and even eliminate requirements that caused the most problems, making it a lot easier for
condominium associations to be eligible for traditional financing.
A condominium project must meet specific requirements to be “warrantable” and eligible for traditional loans. Alternative loans
for “non-warrantable” condos have higher rates and fees and are much harder to find. The difference can easily add up to tens of
thousands of dollars over the life of a loan. The result of the lending guideline changes is that many condo owners can now refinance their
current loans to lower rates. Additionally, buyers who passed on a condo previously because it was non-warrantable may want to take a second
look to see if they can now buy using traditional financing.
4. Commercial space limits increased and parking spaces are now
excluded. Previously, the commercial space in the building was
limited to 25 percent of the total space. Now, the limit is 35
percent and it does not include commercial parking spaces.
Here are five key changes to the condo lending guidelines that
may save you money:
1. No condo project reviews for HOAs with fewer than four
units. Previously, small homeo wners associations were almost
immediately non-warrantable when a single unit was behind
on their dues. Now, these properties are treated more like
townhomes.
5. FHA’s HUD Review and Approval Process (HRAP) is
acceptable. Previously, a condo already approved by HUD still
had to pass a condo review. Now, a condo review is not required
if a property is already approved for FHA loans.
2. Occupancy requirements effectively removed. Previously, the
number of units that were rented and not owner-occupied could
cause a project to be non-warrantable. Now, a series of changes
eliminates that rule in most situations.
This overview provides some of the basic changes to the condominium
guidelines, but it’s best to check all of the details with an experienced
and knowledgeable lender. Additionally, not all lenders and programs
will use the new rules, so you need to confirm you are using the right
program. Finally, act fast. Condos for sale as non-warrantable could
be picked up for a bargain before other buyers know the rules have
changed. If you own a condo, you should check right away to see if
you can save some money on a refinance before rates go any higher.
3. Single entity ownership limits effectively removed on purchases,
with much more flexible calculations on refinances. Previously,
no single entity could own more than 10 percent of the units in
a project. Now, that rule is gone for most purchases and raised
to 20 percent when there are 21 or more units in the complex.
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