Certain Lenders Won't Finance My Downtown Long Beach Condominium ?

So, you're ready to buy a condominium in Downtown Long Beach, CA ?  Did you know that apart from the traditional underwriting guidelines, the collateral (or property) you're buying has to be reviewed, also?  The largest buyer of home loans, Fannie Mae, has strict eligibility requirements for condominium projects.  In fact, if the property you're buying does not meet these eligibility guidelines, it may be deemed as "non-warrantable' which means FannieMae won't put its "seal of approval" on the loan.  This means the loan is less marketable when it gets sold to Wall Street.

The result?  You may not get the best rates/terms if you finance a Downtown Long Beach Condominium UNLESS you check the FannieMae approval BEFORE you place an offer.

Here are six reasons why your condominium project may be declined: 

1- More than 40% of the units are considered "investment properties".  Fannie Mae looks for projects that have a high percentage of owner-occupants. That means that the owners actually live there and don't rent it out.

2- More than 10% of the units are owned by one entity.  Fannie Mae doesn't like to see a high concentration of ownership with one owner.  Such a concentration could cause wild market fluctuations should that owner decide to sell.

3- The Homeowner's Association hasn't been turned over to the owners (or is scheduled in the near future).  Fannie Mae wants to be certain that the owners, not the developer is managing the association.

4- There are not adequate reserves in the Association's bank account to meet operating and extraordinary expenses.

5- The project is subject to rental pooling agreements where the owners agree to operate as a "condotel".

6- The project exhibits hotel-type services (front desk registration,  daily occupancy, food and telephone availability, and /or daily cleaning services)

So what does this mean to you, the potential buyer of a Downtown Long Beach condominium?   Well, if the project is not warrantable by Fannie Mae, you may have stricter underwriting guidelines.  You may not be able to use 100% financing.  The ability to obtain a loan without income documentation may be inhibited.  Finally, the rates may be .375%-.5% higher than a Fannie Mae loan.

Check with your Realtor to discern whether the property is warrantable by Fannie Mae.  If he doesn't know, call me; I can tell you within 24 hours.

Look at these related posts:

Confessions of an ARMs Dealer

Long Beach Realtor Gains National Recognition

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Loving Your Home Loan

The Power of an Annual ARM

I'm in Love with a Dingbat

Multi-Family Loans:  2nd Mortgages 

Apartment Loans 

Brian Brady is America's Most Opinionated Mortgage Broker.  He is featured on the nationally known Bloodhound Blog, NELA Live, the Active Rain Real Estate Network, and is a regular editor and author on the Zillow.com Real Estate Guide.