Buying a new condo in a brand-new building can be exciting. You’re going to be its first resident; and, everything will be yours to paint and make your own!
But, that excitement will turn to high-stakes stress if the building is too new and mortgage lenders won’t make loans in it.
This actually happens and thousands of condo buyers get ensnared each year. It’s because condominiums are community-living buildings that are — technically and legally — businesses.
And, when you buy a condo, you’re buying a “share” of that company.
Like all companies, problems in one area can spill over into the others, which affects the company value, which is why lenders are cautious about new condos — new condos are more susceptible to such problems.
It’s not just new condos that are high-risk, though. Lenders shy away from a building when any of the following are true:
- Fewer than half of the original units in the building have been sold
- One homeowner owns more than 10% of the building’s units
- More than half of the units are being rented out
Buildings with these traits are non-warrantable — a blanket term meaning “high-risk”.
They might also be non-warrantable if more than 15 percent of unit owners are behind in payments; or, if there’s a pending lawsuit involving the association.
It’s tougher to get a loan for a non-warrantable condo, but not impossible; so, don’t avoid a condo building just because it’s brand-new. Your mortgage lender will help you navigate when the time is right.
Are you a first time home buyer?
Let us know if you’ve done this before - whether you’re a seasoned pro or buying for the first time. We’ll share the perfect information with you as you need it.
Home buyers snatched up properties for sale in May as housing made its v-shaped recovery.