Condo

A successful condo purchase ALWAYS begins with a clear understanding of the resale certificate. In this article, I will show you what you need to know and what to look for when buying a condo and reviewing a resale certificate.

As a mortgage loan officer, you cannot finance a condo without having a mortgage lender fully audit (underwrite) to ensure it meets a qualifying criteria that helps position you for a successful home ownership experience. As one of the Top 1% Loan Officers in the US (according to Scotsman Guide), and anchored here in the Seattle/Bellevue area, I have a lot of experience educating my clients as they finance condominiums.

What Is A Resale Certificate?
When selling a condo in the State of Washington a Seller is required to complete a resale certificate representing the condo project. A resale certificate is a set of documents that a Seller provides to a Buyer when making an offer on a condominium unit. These documents contain important information about the Homeowners Association (HOA), total number of units, budget, meeting minutes from the HOA’s most recent meeting, outstanding debt against the unit, rental policy and procedures, monthly assessments and the Covenants, Conditions & Restrictions (CC&Rs) for the building in which the unit is exists.

I’ve put together this helpful infographic to help you better understand what you need to look for while reviewing a resale certificate and what could cause a lender to disqualify you from purchasing a condo.

Rules & Regulations
The pet policy, rental caps, & parking restrictions are found in the Rules & Regulations. This will let you know if the project allows for an Air B&B or other short-term rentals, along with whether or not the size of your golden doodle meets the weight requirements for a pet! Rules for common amenities and common ground are explained here as well.

Annual Budget
You absolutely want to be current on the annual budget. What does it cost per year to maintain the condo complex? Are there plenty of reserves (a min of 10% of gross HOA dues required)? Is the HOA building reserves or running low? Understanding the budget and its strength is important to avoiding unforeseen future increases in your HOA dues.

Reserves
Reserves are very similar to your own personal savings account. Reserves are held (saved) in a bank account for the condo complex. They are the safeguard when something unexpected arises. or needs repaired. Lenders want to see a minimum of 10% of the total HOA dues collected annually in reserves. When a repair is needed (ex: new roof) and there aren’t enough reserves, each homeowner gets hit with a special assessment charge (addition to their regular monthly HOA dues) until enough money is accounted for to pay for the repairs.

Reserve Study
This is a professional report drafted by a licensed and bonded professional that gives you an overview of the financial and structural health of condo building. You will find a 30-yr maintenance schedule along w/ upcoming projects that will be required during your time of ownership. For example, if there is a major paint job required in 4-years, you may want to verify there are enough reserves to cover that work to avoid an increase in your HOA dues. I recommend reviewing this with your real estate agent or attorney.

Meeting Minutes/Declarations
The meeting minutes gives you insight into current topics being discussed in the building. They will reference plans for building updates, delinquencies, legal issues (pending litigations), and more. The declarations refer to the percentage of ownership – the square-footage of your unit relative to the # of units and the amount you contribute to the HOA dues. This is how you will calculate your percentage of a special assessment when issued. You’ll also find your parking space number(s) and storage number here.

Five Things Lenders Require In Order To Buy A Condo
1. Reserves: Lenders want to see 10% of the general budget (HOA dues collected) going into the reserve account every year. As a buyer, you want to see a high amount of financial reserves as this reduces the likelihood of a special assessment for projects and repairs needed in the future.

2. Delinquency of Dues: The percentage of units delinquent on paying their HOA Dues can impact the ability to get a loan on a condo. Mortgage lenders want to see under 10% of the units in the HOA delinquent.

3. Rental Ratio (investor to owner-occupied ratio): Mortgage lenders and buyers like to know the percentage of units that are rented vs. owner occupied (which includes 2nd homes). This number is important because it can affect the resalability and home values in the complex. Mainly because it impacts a buyer’s ability to get a loan in the building. Mortgage lenders like to see a 51% or higher owner occupancy ratio.

4. Special Assessments: Buyers and their lenders want to know if there are any additional costs to them for building repairs or maintenance in the form of special assessments. Even if there are no current special assessments, lenders and buyers will want to verify that there are no pending special assessments either. This is where it’s important to read the meeting minutes.

5. Litigation: This is typically a deal killer with all mortgage lenders. If the building (HOA) is in litigation with the building’s developer, a contractor, homeowner, etc lending will be challenging and nearly impossible until it’s resolved.

Financing A Condo
You can purchase a condo with as little as 3% down (actually $0 down with a VA home loan or USDA home loan). The most common form of financing for a condo is a Fannie Mae backed conventional loan program. Fannie Mae allows a borrower to put down as little as 3% when buying a condo.

It’s important to note, that with less than 10% down, and full review of the condo project (HOA) is required. With 10% down or greater, Fannie Mae will allow for a limited review (review of the master insurance policy, an assessment of the HOA dues collected, and a review of the HOA’s foreclosure process).

CLICK HERE to apply for a home loan with Dan Keller to purchase a condo.

All of this can be confusing, that is why I’ve put together this information for you. One of the most important things to consider when buying a condominium is the TEAM you choose to help you. Choosing a mortgage loan officer like me that has years of experience with financing condos (along w/ having an in-house condo review department) and a real estate agent that can help walk you through the ins and outs of a resale certificate is important. If you need a recommendation to a great real estate agent that sells condos, please let me know, I am happy to make an introduction! All the best with your condo home search!

5 Mistakes People Make When Buying A Condo
1. Verify your parking spot(s)
2. Verify you HAVE a storage unit/space
3. Rules/Regulations – grilling, pet, moving
4. Not knowing the # of non-owner occ units (investor to owner ratio), rental caps (yes/no?), more renters harder to finance
5. Not thinking about the resale value (improvement/mods you make),

A successful condo purchase ALWAYS begins with a clear understanding of the HOA (home owner’s association). The HOA is typically managed by a neutral 3rd party or resident owners that appoint a president, vice-president, and treasurer to manage the HOA. Your understanding of the HOA along with the strength and organization of the HOA is done through a required condo/HOA document called a resale certificate. In this article, I will show you what you need to know and what to look for when buying (financing) a condo; and how to review a resale certificate with your real estate agent.
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As a mortgage loan officer, I will give you a look “under the hood” at what it takes to buy a condo.
As a buyer, you cannot finance a condo without having a mortgage lender (or bank) fully audit (underwrite) the HOA to ensure it meets a qualifying criteria that helps position you for a successful home ownership experience. As one of the Top 1% Loan Officers in the US (according to Scotsman Guide), and anchored here in the Edmonds/Seattle/Bellevue area, I have a lot of experience educating my clients as they finance condominiums and look forward to giving you this insight from my experience.
.

What Is A Resale Certificate?

When selling a condo in the State of Washington a Seller is required to complete a resale certificate representing the condo project. A resale certificate is a set of documents that a Seller provides to a Buyer when making an offer on a condominium unit. These documents contain important information about the Homeowners Association (HOA), total number of units, budget, meeting minutes from the HOA’s most recent meeting, outstanding debt against the unit, rental policy and procedures, monthly assessments and the Covenants, Conditions & Restrictions (CC&Rs) for the building in which the unit is exists.
.
I’ve put together this helpful infographic to help you better understand what you need to look for while reviewing a resale certificate and what could cause a lender to disqualify you from purchasing a condo.
.

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.

Rules & Regulations

The pet policy, rental caps, & parking restrictions are found in the Rules & Regulations. This will let you know if the project allows for an Air B&B or other short-term rentals, along with whether or not the size of your golden doodle meets the weight requirements for a pet! Rules for common amenities and common ground are explained here as well.
.

Annual Budget

You absolutely want to be current on the annual budget. What does it cost per year to maintain the condo complex? Are there plenty of reserves (a min of 10% of gross HOA dues required)? Is the HOA building reserves or running low? Understanding the budget and its strength is important to avoiding unforeseen future increases in your HOA dues.
.

Reserves

Reserves are very similar to your own personal savings account. Reserves are held (saved) in a bank account for the condo complex. They are the safeguard when something unexpected arises. or needs repaired. Lenders want to see a minimum of 10% of the total HOA dues collected annually in reserves. When a repair is needed (ex: new roof) and there aren’t enough reserves, each homeowner gets hit with a special assessment charge (addition to their regular monthly HOA dues) until enough money is accounted for to pay for the repairs.
.

Reserve Study

This is a professional report drafted by a licensed and bonded professional that gives you an overview of the financial and structural health of condo building. You will find a 30-yr maintenance schedule along w/ upcoming projects that will be required during your time of ownership. For example, if there is a major paint job required in 4-years, you may want to verify there are enough reserves to cover that work to avoid an increase in your HOA dues. I recommend reviewing this with your real estate agent or attorney.
.

Meeting Minutes/Declarations

The meeting minutes gives you insight into current topics being discussed in the building. They will reference plans for building updates, delinquencies, legal issues (pending litigations), and more. The declarations refer to the percentage of ownership – the square-footage of your unit relative to the # of units and the amount you contribute to the HOA dues. This is how you will calculate your percentage of a special assessment when issued. You’ll also find your parking space number(s) and storage number here.
.

The 5 Things Lenders Require To Finance A Condo

1. Reserves: Lenders want to see 10% of the general budget (HOA dues collected) going into the reserve account every year. As a buyer, you want to see a high amount of financial reserves as this reduces the likelihood of a special assessment for projects and repairs needed in the future.

2. Delinquency of Dues: The percentage of units delinquent on paying their HOA Dues can impact the ability to get a loan on a condo. Mortgage lenders want to see under 10% of the units in the HOA delinquent.

3. Rental Ratio (investor to owner-occupied ratio): Mortgage lenders and buyers like to know the percentage of units that are rented vs. owner occupied (which includes 2nd homes). This number is important because it can affect the resalability and home values in the complex. Mainly because it impacts a buyer’s ability to get a loan in the building. Mortgage lenders like to see a 51% or higher owner occupancy ratio.

4. Special Assessments: Buyers and their lenders want to know if there are any additional costs to them for building repairs or maintenance in the form of special assessments. Even if there are no current special assessments, lenders and buyers will want to verify that there are no pending special assessments either. This is where it’s important to read the meeting minutes.

5. Litigation: This is typically a deal killer with all mortgage lenders. If the building (HOA) is in litigation with the building’s developer, a contractor, homeowner, etc lending will be challenging and nearly impossible until it’s resolved.
.

How To Finance A Condo

You can purchase a condo with as little as 3% down (actually $0 down with a VA home loan or USDA home loan). The most common form of financing for a condo is a Fannie Mae backed conventional loan program. Fannie Mae allows a borrower to put down as little as 3% when buying a condo.

It’s important to note, that with less than 10% down, and full review of the condo project (HOA) is required. With 10% down or greater, Fannie Mae will allow for a limited review (review of the master insurance policy, an assessment of the HOA dues collected, and a review of the HOA’s foreclosure process).

CLICK HERE to apply for a home loan with Dan Keller to purchase a condo.

All of this can be confusing, that is why I’ve put together this information for you. One of the most important things to consider when buying a condominium is the TEAM you choose to help you. Choosing a mortgage loan officer like me that has years of experience with financing condos (along w/ having an in-house condo review department) and a real estate agent that can help walk you through the ins and outs of a resale certificate is important. If you need a recommendation to a great real estate agent that sells condos, please let me know, I am happy to make an introduction! All the best with your condo home search!
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