Acondo questionnaire is a document lenders require to fund a property designatedas a townhouse or condominium that’s part of a homeowner’s association. Thedocument offers evidence that condominium projects such as Eighty Seven Park Miamicomply with the lender’s underwriting prerequisites.
Moreover,it offers a way of obtaining some significant facts regarding the stability ofyour possible real estate investment as well as a future home. If you’relooking to invest in our luxurious condominiums at Eighty Seven Park, here’s what you shouldknow about the document.
What a Condo Questionnaire is
Lendersuse the document to screen homeowners associations with a similar intensityprospective renters and buyers face. They do so because the federally backedfunding sources (Freddie Mac and Fannie Mae) need it.
Ifthe condo development doesn’t meet eligibility prerequisites, nobody can obtainconventional mortgage funding to purchase in that development. The hugedrawback for a buyer is that if the development doesn’t meet eligibility, theyprobably won’t obtain a government-backed loan for it and they’ll need to pay abigger deposit if they decide to obtain funding another way.
Therefore,the questionnaire requirement makes purchasing Eighty Seven Park pre construction more complexfor all parties.
How a Condo Questionnaire Works
Lendersconsider condominium units riskier than single-family homes because thephysical and fiscal well-being of the entire development affects the unit’svalue. If other residents fall behind on their association fees, it influencesthe community’s fiscal health.
Similarly,if a high proportion of non-occupant owners rent out their units withoutmaintaining them, it affects the community’s physical state. Therefore,association managers or HOAs are supposed to fill out the form upon a lender’srequest.
Itoffers information regarding whether development is warrantable. Previously,lenders used to write up condominium questionnaires, but this changed in 2016.Freddie Mac and Fannie rolled out standardized questionnaires, thusstreamlining and generating consistency in the review process. While somelenders use theirs, the standardized forms are easy to process and access.
Condominium Lender Prerequisites
Condominium lenders assume a great risk when funding a condo construction. As a result, a lot of work must take place in document execution before breaking ground. Due diligence must take place to make sure the property is marketable upon completion and the purchase contract must specify there’ll be a sufficient number of sales.
Consequently,lenders typically take extra care to prevent any errors in documenting thelegal roles with the developer and other stakeholders in the contract.
Warrantable vs. Non-warrantableCondo
For a condominium development to be warrantable, it must meet an extensive requirement list laid by Freddie Mac and Fannie Mae. Some of the limitations might seem apparent. For instance, the unit can’t be part of a houseboat project or timeshare.
Awarrantable condo ensures that at least 10% of the yearly budget goes toreserves and at least ½ the units should be owner-occupied. Before investing ina condo development, we recommend you verify whether it qualifies forgovernment-funding.
Establishingwhether your condominium is warrantable isn’t easy. After all, Freddie Mac andFannie Mae don’t maintain a public list of endorsed projects. Rather, yourlender might need to order a condo review to establish whether the property iswarrantable.
Ifyou’re considering a condo investment, we recommend you consult a real estateagent who should inform you upfront. If he doesn’t, you might struggle toacquire financing. Fortunately, you’ll discover that our Eighty Seven Parkpre-construction condos are warrantable and worth the investment.
Anon-warrantable condominium doesn’t fulfill all of Freddie Mac or Fannie Mae’slending requirements. Beware that it can be challenging to secure financing fora non-warrantable development. Regardless of how creditworthy you are, locatinga lender that underwrites mortgages for non-warrantable units might be hard. Acondo development isn’t warrantable if it’s party to a lawsuit; it operates asa motel or hotel, also called condotel; requires membership, for instance,country club or golf club.
Drawbacks of non-warrantablecondominiums
Issues purchasing the condominium
As a purchaser, you’ll need to meet eligibility for a portfolio bank loan rather than a conventional loan. While lending practices vary across banks, you can expect strict underwriting criteria. You might need a huge down payment to purchase the unit.
Issues with the condo’s fiscalhealth
Developmentmight be non-warrantable because numerous owners are delinquent on associationdues or if the project sends inadequate money to its reserve fund for emergencycosts. Both signs reveal that the HOA might have cash flow issues. If anassociation can’t meet its economic obligations, owners might witness anincrease in their association dues. In some instances, owners might need to paya special evaluation to cover necessary improvements and repairs.
Issues selling the unit
Whenthe time comes to sell a non-warrantable unit, it will attract a smallerportion of buyers. Numerous purchasers won’t have the essential credit or downpayment needed to secure a portfolio loan.
Ability to secure funding
Fromthe surface, a non-warrantable and warrantable condominium might appearsimilar. However, whether your unit is warrantable makes a difference in yourcapacity to invest in the property. If you discover a development isnon-warrantable, consider the risks before investing.
Most people buy a condominium to serve as a vacation home or personal residence, but they can make great investments. They’re particularly appealing for beginner investors or those who seek turnkey properties. That’s because they typically need fewer repairs, and can be a cheaper alternative to single-family homes in a similar market.
