Condo loans could be difficult to get

Looks like refinancing or getting a loan for a condo purchase is going to get tough. Underwriting changes by Fannie Mae and Freddie Mac as well as new restrictions by private mortgage insurers are going to limit the number of loans available for condo purchases.


Kenneth Harney, a nationally known columnist on real estate, reported that many private mortgage insurers will no longer write coverage on condominiums in hundreds of areas across the country that are designated as having declining markets. Even in parts of the country where real estate markets are healthy there are going to be difficulties. Buyers will be required to put a least 10% down, and if the condo project's ownership is made up of more than 30% investors then all buyers loan applications will automatically be turned down. Buyers with 20 % or more down will avoid paying PMI so they won't be affected with the new restrictions.

These new procedures are going to be time consuming for lenders as they're going to require a lot of research on condo project characteristics. Legal documents, condo association operating budgets, percentage of unit owners that are late in association fees, and percentage of units owned by investors are just a few of the areas that will need to be investigated in order to insure a new loan. On top of that lenders are going to be required to warranty their research. Fannie Mae said the new procedures are designed to "protect borrowers and manage increased credit risk in the market".

Tucson's condo market could be seeing some hard times ahead. In the last few years several Tucson apartment complexes were converted into condominiums. Needless to say we have a lot if condos in the Tucson area. As of today there are about 150 condo units for sale in North Tucson alone. The new restrictions could have a big impact on local condo sales. It's going to be interesting to see the sales numbers over the next few months!

Securing a loan for a condo might become even tougher