4 Essential Tips for Condo Mortgage Brokers
Homeownership options have come a long way since the traditional idea of a suburban home with a white picket fence. Especially in a fluctuating housing market, more and more borrowers are exploring less traditional paths to homeownership, including condo living. Cardinal Financial Wholesale’s condo financing can help you reach those borrowers. Before we dive into the world of condo loans, let’s explore a few tips for condo mortgage brokers.
4 Essential Tips for Condo Mortgage Brokers
- Get to know the types of properties that qualify as condos
- Understand the difference between warrantable and non-warrantable condos
- Know the types of condo products available
- Understand the pros and cons of condo living
Property Types That Qualify as Condos
In broad terms, a condo, or condominium, is a unit within a building of multiple units and common areas. While the borrower owns their unit, the common areas are funded by fees paid to the condo association. Like an HOA, the condo association decides how the funds are allocated for repairs, updates, and any additions to the common areas.
Condos aren’t limited to an apartment-style layout, though. They could also be townhomes, detached condos, and more. In other words, your borrowers have more options than they might think when it comes to condo living.
Warrantable Condos vs. Non-Warrantable Condos
While it’s possible to finance both warrantable and non-warrantable condos, warrantable condos tend to be a less risky (and less complex) investment for lenders. Let’s break down the differences.
Warrantable condos can be simpler to finance since they already meet certain criteria:
- Approved for Conventional financing
- May also be eligible for VA or FHA loans
- Can’t be part of a timeshare
- At least half the units in the community must be owner-occupied
Non-warrantable condos don’t meet Conventional, VA, or FHA financing requirements due to one or more of the following factors:
- The property is under litigation
- More than 25% of the units in the community are used commercially (as vacation rentals, for example)
- Multiple unit owners are delinquent on their membership dues
- A single person or entity owns more than 10% of the units in the community
Types of Condo Loan Products
At CF Wholesale, we offer Conventional, FHA, and VA condo loans. Conventional condo mortgages typically offer more flexibility in terms of the properties that can qualify. To be eligible for an FHA condo loan, properties must be on the FHA’s approved condominium project list. For qualified borrowers, VA condo loans work similarly, but they also include all the perks of a VA mortgage like no down payment or mortgage insurance required.
The Pros and Cons of Condo Living
Like selling any mortgage, it’s important to consider the pros and cons your borrowers will be taking into account when choosing their condo loan. So, let’s break down the common pros and cons of condo living.
Condo Pros
- Borrowers can build home equity
- Less responsibility than a whole house
- Often in more central locations than houses
Condo Cons
- Typically less space than a house
- Borrowers will likely live in closer proximity to neighbors than in a house
- Different condo properties have different requirements, so it can be harder to know what to expect from the financing process
Condos: The Cardinal Difference
While we aren’t the only mortgage lender to offer condo loans, working with CF Wholesale means you can offer “pre-flight evaluations” for your borrowers interested in a condo loan. Our team of condo experts can look at the project ahead of time and determine the likelihood of a loan being approved. This in-house service is completed before your borrower starts the loan process, saving all parties time and frustration down the line if the property ends up not being eligible.
For more information about condos and other unconventional mortgages, get in touch. We’re here to help.
Your borrowers have more options than they might think when it comes to condo living.
