Mortgage Lenders in NJ Anticipate Tough Times for People Looking to Get a Condo

Condominiums have become very attractive to retirees and ‘empty-nest’ parents who are looking to downsize. They offer a lot of advantages over a great, big house that you have to clean and maintain. However, while their practicality is appealing the process to obtain a mortgage lender in NJ is not so easy. As a result, these obstacles make it difficult for potential condo buyers who want to engage in the mortgage process or current condo owners who want to refinance.

One leading expert from Supreme Lending in Texas summed it up nicely: “Condos are like the canary in the coal mine, a leading indicator of the health of the real estate market. Recently, [mortgage] lenders’ biggest losses [have] come from condos, so they are viewed as risky.” Furthermore, some mortgage lenders in NJ reject condo loans altogether.

Mortgage Lenders in NJ: Standards Differs for Houses vs. Condos

One of the most distinguishing features of a condo loan, and a roadblock for mortgage lenders in NJ is that they have to pass through two stringent doors. First the borrower has to quality for the loan and then the condo association has to qualify. While the borrower has at least some impact on the former, they have no control over the latter.

Ultimately, mortgage lenders in NJ follow the guidelines from the Federal Housing Administration (i.e. Fannie Mac or Freddie Mac). Some of the requirements are as follows:

• More than half of the condo units must be owner-occupied.
• No owner may own more than 10 percent of the units.
• No more than 15 percent of the owners can be delinquent on condo dues.
• All amenities must be completed before the development is more than 12 months old.
• Buyers who make a down payment of les than 25 percent will pay an additional 0.75 percent of the loan amount at the closing or a higher interest rate of about 0.25 percent.

Myth: You can buy a condo without a big down payment.

Fact: The rules are much stricter now more than ever. However, if you find a complex that has already received FHA approval, you can usually get in with a down payment of about 3.5 percent. FHA approval essentially depends on the financial health of the condo, so condo association needs to prove that they have sufficient insurance, budget with reserves, and no pending lawsuits.

So Where Do You Begin?

First, make sure that the building or complex is approved for FHA loans. If not, then ask the mortgage lender in NJ if the building meets Fannie Mae and Freddie Mac guidelines. Furthermore, ask the condo managers to see a completed homeowner’s association certification that would provide information on condo fee delinquencies, insurance and other important factors that would affect their eligibility for loans.

However, even if the condo meets all specified government guidelines, you may still find that you need to make a sizable down payment because the mortgage companies are less willing to provide mortgage insurance on condo loans since they carry more risk. As a result, seek a reputable, qualified mortgage lender in NJ to help guide your through the process.