Financing in 60657>Question Details

Diwu_sk, Real Estate Pro in Rochester Hills, MI

I am trying to refinance on my single family detached condo, the lender is saying the owner occupancy ratio is not met and i cant get conventioal loan

Asked by Diwu_sk, Rochester Hills, MI Wed Jun 15, 2011

What is the ratio requirement from fannie mae/freddie mac. Is this ratio same for detached condo and attached condos? If there are multiple builders who are building detached homes how does this work?

1 vote Share Flag Financing in 60657

Help the community by answering this question:


I'd like to thank Shane for pointing this out. Here in Chicago, DETACHED condos are unusual.

I WOULD HAVE answered that if this were an investment property, (since you're a property manager in MN and the category your question was in was "Financing in 60657") that a full review is always warranted, and therefore an owner occupancy rate of 51% would be called for (BTW, that's the number you were looking for)

HOWEVER, after reading Shane's response, I actually looked through the guidelines and sure enough, this requirement is not applicable to DETACHED condos, whether they be investent or not.

Huh. I learned something today.

So, what's my point? To praise Shane? No. Shane and I are competitors (assuming he can lend in either MN or Chicago, which, BTW, I can)

My point is that if I didn’t know it, and was SO SURE of my answer before looking up the guidelines, then it’s equally likely that the underwriter with your current lender is as ignorant (classical sense of the word) as I was.

Underwriters are human. They make mistakes too. And, when they don’t know something, they frequently turn to the underwriter next to them and ask THAT underwriter, who is ALSO human, and ALSO prone to mistakes, rather than look it up (that link that Shane posted is over 1000 pages long – what would YOU do?)

However, I’ve found that when I speak with an underwriter and show them the error of their ways, they, like me, are just as happy to have learned something new.

So what I’m saying is, take this information, tell your current lender that not only is HE wrong, but his UNDERWRITER is wrong too (they’re gonna LOVE you!)

And if they don’t see the error of their ways, give me a call and I’ll get this done for you. (What? Did you think I was gonna say “Call Shane”? We’re COMPETITORS!)

Matt Bukovy
Sr. Mortgage Consultant
Wintrust Mortgage
Cell 773-416-7107
Web Reference:
1 vote Thank Flag Link Wed Jun 15, 2011
If this is your owner occupied home, your lender has some very stringent guidelines, as detached condominiums should not have any owner occupancy requirements. With an Approve/Eligible decision from Fannie Mae's automated underwriting system called Desktop Underwriter (DU) then investment properties are also fine (which is the only way lenders are approving investment properties for Fannie Mae's loan programs that I know of).

The review process your lender needs to go through is called the "Fannie Mae Limited Review - Established (Type Q) Detached Condominium". To be eligible under that review process, the project must meet:

- The mortgage is secured by a single detached unit in a condo project.
- The mortgage is not secured by a manufactured home
- The project is not an ineligible project
- The condo unit is occupied as the owner’s principal residence or second home, whether the loan is manually underwritten or submitted to DU
- The condo unit is an investment property and the loan was submitted to DU.
- The appraiser commented on, and reflected in the appraisal report, any effect that buyer resistance to the condo form of ownership has on the market value of the individual unit.
-If the condo project is new, the appraiser used as a comparable sale at least one detached condo unit, which may be located either in a competing project or in the subject project, if the condo unit is offered by a builder other than the one that built the subject unit
-The property is either covered by
• the type of hazard and flood insurance coverage required for single-family detached dwellings, if the condo unit consists of the entire structure as well as the site and air space, OR
• the project’s master hazard and flood insurance policies, if the condo unit consists only of the air space for the unit and the improvements and site are considered to be common areas or limited common areas

Those are all of the guidelines. The reason you didn't see any occupancy requirements is because there are none. If your lender has any doubts they can go to - page 580/581. Ask if your lender has "has an owner occupancy requirement no matter what" - if they do then you know they wouldn't be the lender for your mortgage transaction.

If you need help just let me know.
1 vote Thank Flag Link Wed Jun 15, 2011
HOA is just a homeowners association, and both a condo and PUD (planned unit development) normally have them. I've even seen a few single family residences have some small HOA dues as well (like part of a city that has rights to use a local lake, etc.)

NY and the east coast is very different, so I can understand why it's a little different from the properties you normally see out there. However it's very popular in all of the areas where values got overblown - FL, AZ, NV, CA & apparently MI too.

Get this right... out here there are condo complexes, or what you would think is a condo complex, it even looks more like an apartment complex... however because the developer was clever and zoned them as PUD's, these attached-condo-looking things actually never have to meet occupancy requirements, get FHA or VA approval, etc... here is one of such buildings that I helped someone buy in. Notice the agents comment at the bottom, "Title information says Single Family Residence not condo ?????"…

Here is another Trulia thread about PUD's - and some great answers too:…

So people buy these "site condos" because some features are paid for - such as the insurance policy, or upkeep of common areas such as a community park, swimming pool, community clubhouse, etc.

One such example is a very new community of Ladera Ranch, CA (close to where I live), it has a mix of single family residences, PUD's, attached condos, and I believe even detached (site) condos as well. Check out it's website for all of the amenities it offers. It's a little too "family" for me, but a lot of people love it (and pay ~$600/mo HOA fees for it as well).
0 votes Thank Flag Link Thu Jun 16, 2011
Shane, are they HOAs or condos? In NY there are no detached condos. Detached units are all HOAs.
Why would anyone buy a condo that had no amenities? I personally would not buy in a development whether it is condo or not if less then 51% of the homes were owner occupied.
0 votes Thank Flag Link Thu Jun 16, 2011
Thanks for informing me what a condominium was Annette <-- sarcasm

Annette did you know that I actually owned a detached condominium like Diwu_sk has described? It's called a "site condominium" because each condo unit has what appears to be it's on lot, usually with a zero lot line (neighbors side of the house is your fence), but the lot size in general is much smaller as I have found that developer's did this to squeeze more homes on a piece of land since if it's a condo it can be closer together than regular single family residences can.

At one point detached condominiums had many of the same difficulties that attached condominiums have, but not so anymore. Detached condominiums are treated more along the lines of a single family residence than they are an attached condominium.

Annette, from your profile you have been doing mortgages for 25 years... however the detached condo guidelines I am referring to came out in 2008 or 2009, not so long ago. If you don't believe me, call up Fannie Mae.

Further Annette, site condos do not require FHA approval or spot condo approval, provided the property is a fully detached single-family site condo, no shared buildings/garages... so it doesn't matter if the detached site condo is FHA approved or not. You can read something new at:…
0 votes Thank Flag Link Wed Jun 15, 2011
Condominium is an ownership type. Shane when you buy a condominium, you don't own the land it is sitting on. If the association has less then 75% owner occupied a spot approval is not happening. Is the condominium FHA approved. If it is then that would be your best bet. If not you need a private lender. They do not go past 80%
0 votes Thank Flag Link Wed Jun 15, 2011
LOL Matt, well I'm with a Federally Chartered Bank/lend in all 50 states too so =P

Yes overlay guidelines do stink, but I've even found underwriter's don't read their own overlay guidelines too well. I feel sometimes that you practically have to include sections of the underwriting manual with your loan submission, but hey that is what we're supposed to do as a loan officer, make it easy for everyone else.
0 votes Thank Flag Link Wed Jun 15, 2011
One more thing: Even though you, Shane, and I all know that Fannie Mae would indeed allow a limited review on a DETACHED condo, an individual bank or investor may have their own "overlay" where they would NOT allow it.

So it's a good thing that my company, Wintrust Mortgage, which lends in all 50 states, and operates under a Federal Bank Charter, sells directly to Fannie Mae, which would eliinate those overlays.

0 votes Thank Flag Link Wed Jun 15, 2011

The only option you have if there is too many delinquencies is if the loan is backed by Fannie or Freddie and you can do a HARP loan. If you would like I can look this up for you and see if this is a possibility. It only takes a few minutes. Good luck in your search...

Steve Smither
Midwest Equity Mortgage
Senior Loan Originator
0 votes Thank Flag Link Wed Jun 15, 2011
Condos whether attached or detached are all grouped together. In a refinace the first thing looked at is your loan to value ration. If there is a high tenant occupied number of condos, you will need a higher amiunt of equity but can be refinaced, in most cases you will need 80% ltv which means they will loan 80% of what your condo appraises at in todays market
Web Reference:
0 votes Thank Flag Link Wed Jun 15, 2011
Speak to Vince Kueffner or one of his team members at Wintust - very good and trustworthy.
Gustavo Herrera of Wells Fargo
0 votes Thank Flag Link Wed Jun 15, 2011
Lenders are cautious of HOAs that have high amounts of builder units, if a builder goes under, the HOA can go into default, this means every unit in the complex is at risk by another source other than your lender.
So they like High Ownership numbers and low builder owned or yet to be built numbers. Usually the lender wants to see 75% owner or better. Each area is different, for example in Tampa a large number of Condo association have been in financial stress so the requirement s more like 90% owner units and a stable association in order for the lenders to feel comfortable!
0 votes Thank Flag Link Wed Jun 15, 2011
I have a lender who can do a refi if it can be done. Pls email me your contact info at
0 votes Thank Flag Link Wed Jun 15, 2011
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