A majority of home buyers are not aware of the fact that when you apply for a loan there are actually 2 approvals that take place.
What does that mean exactly?
Well, the lender reviews the file based on a few things: your credit and income, and the collateral; the collateral must be sufficient in order for a loan to be approved. When the collateral happens to be a condominium there is increased scrutiny by the lender. Why?
The fact that a condo typically has shared walls, ceilings, or floors, and there is more risk to the lender because the loan is somewhat dependent on the status of the units surrounding the condo. Thus, lenders will ask questions of the Homeowners Association (“HOA”) regarding the condominium complex to evaluate whether they want to accept the risk and make a loan on the property. The type of loan you apply for can make a difference to the lender as to whether they will approve the condo.
In addition to being on an approved list, the lender typically has a questionnaire that must be completed by the condominium association before they will lend on the property known as a condo questionnaire.
If you are applying for a FHA loan the condominium complex must be approved by FHA. You can check to see if the complex has been approved by FHA, as well as VA, Fannie Mae and Freddie Mac by going to: /lending-on-condominiums-2
When you are considering purchasing a condominium, contact the HOA to find out what the answers are to the above questions. A little bit of homework before you accept a contract will save many headaches and heartbreak later in the process.
If you have any questions, contact us and we will be happy to help you.
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