Most lenders require a new condo to be 50% sold in some cases, 70% in others. Often you will be told 70%, but there is a more complicated method for qualifying buildings which, when used, may allow the bank to lend 50%. In general, this refers to percent sold OR in contract. Sometimes what happens is when enough units are in contract to meet the thresshold, then all can start closing. Some condos have, of late, sought out and received FHA designation. This then allows only 30% to be sold or in contract, a much easier thresshold to meet and has the added advantage that in NYC for FHA you only need to put down 5% (used to be 3.5%),
Halstead Property, LLC
You also need to find out if the condo building you're interested in has a bank or two that they are specifically working with. This is usually the case for new building or newly converted building that has a low percentage of ownership.
I hope my answer helped you out.
Both Stacy and Amy are correct. If this is not a new building, and it has a low owner occupancy (under 51% for most banks and under 70% for some banks), you are in for a difficult time finding financing. I would suggest speaking to a reputable mortgage broker and getting their opinion on that specific building. I would also speak with your attorney and get a legal opinion on purchasing a unit in such a building.
One of the reasons this low owner occupancy is a risk for banks is if an individual owner, that is the majority owner in the building, defaults, the rest of the units in the building must pay for a much larger share of common charges in the building, which may in turn cause more defaults in the building creating a totally unviable building. Although the idea of the sponsor defaulting seems small, the reality is that sponsors have defaulted in the past and will do so again in the fututre. Banks have become totally risk averse and will not risk giving loans on buildings that do not meet their new (and extremely strict) underwriting requirements.
I hope this helps,
All the best,
WEICHERT, REALTORS - House & Home
(718) 432-5000 ext.601 (Office)
(917) 974-2600 (Cell)
I would do a lot of research before moving forward. Who is the sponsor, what are their plans to sell those 29 units, what will they do if the units do not sell, etc. Talk with a few lenders and see if anyone will take on the loan. You should ask if FHA is a possibility. If not, cash is really the only answer.
Stacy Carter - Associate Broker
Home Appreciators - Real Estate & Renovations
at Better Homes & Gardens Real Estate Metro Brokers