Can you help me find a lender that will approve my loan application for a condo that I'd like to buy for investment but it has 30% HOA?

Asked by Rita, 20854 Wed Jul 27, 2011

delinquency? I spent a total of $750 for an inspection and appraisal on the condo in DC when I had a contract on it but several lenders' underwriters declined my loan applications because of the condo's 30% HOA delinquency (they require 15% or less). What would you do in my shoes? Should I keep trying other lenders? Would the condo be a good investment with that high delinquency?

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12
, ,
Wed Jul 27, 2011
Due to the >15% delinquency rate this specific condominium is not "warrantable", meaning you'll have to find non-FHA, VA, Fannie Mae or Freddie Mac loan programs - leaving "non-conforming" loan programs or "portfolio" lenders as the only options. There certainly are those types of lenders in the DC/VA area, however they will also have requirements for their condominiums, perhaps they'd allow a higher delinquency rate, but essentially 1 out of ever 3 unit owners is past due on their HOA dues... if the HOA doesn't have adequate reserves to weather this financial storm that is happening then the HOA complex could have extreme financial difficulties in the future. However if the condominium as a whole improves financially, less owners are delinquent on HOA fees, etc. it could turn from a non-warrantable condominium (lower demand) into a warrantable condominium (higher demand) and increase the home's value just because the pool of available buyers has opened up.

I'd recommend you read up on Rebecca Law's blog regarding "How to X-Ray an HOA" (Rebecca is a real estate agent in Minneapolis), it's a 9 part series (each part is short) on the items you really should consider when purchasing a condominium or any home that is part of an HOA. It gives you a lot of food for thought.
1 vote
Miekeba Jones, Agent, Silver Spring, MD
Thu Jul 18, 2013
Hi Rita, it would have to be non FHA with a delinquency rate over 15%. I do have a list of condos that will be approved from a lender I know. Contact me and I will give it to you.
0 votes
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0 votes
Susan Isaacs, Agent, Washington, DC
Mon Aug 22, 2011
On an approved short sale the bank is the seller anyway, and an agent should inquire about the delinquency rate before committing the buyer to transactional costs. There's a method for short sales that an experienced short sale agent will employ to make your search, offer and sale transaction more efficient and successful. Run the scenario by one or more of the lenders listed below before moving on, since you seem to really like the property. Find out how the delinquencies are being handled, what stage they're in and review the most current association budget carefully. Your agent might also review the delinquency rate in neighboring buildings to compare. Association health is a big factor in investment value, so be sure you understand all the numbers well. Ask as many questions as you feel are necessary to fully inform you as to the current and projected status and implications for future association condition.
0 votes
George Ross, Agent, Baltimore, MD
Wed Jul 27, 2011
No lender is going to take a risk like that with only 20%, you really need to come up with a better down payment.

Also, shame on your agent. I highly suggest you move on from the transaction and your agent.
0 votes
Rita, Home Owner, 20854
Wed Jul 27, 2011
Yes, I have an agent working with me. In fact, the condo was on a short sale when I had a contract on it. It was a bit challenging dealing with the seller as the owner has walked away and the bank is the seller. At first, they gave me the wrong amount of HOA fee on the contract and we found out that the fee has actually doubled a few years ago when we contacted the condo management. My credit score is excellent and I have enough funds for 20% down payment. Everything is great except for the 30% HOA delinquency that the loan underwriters couldn't accept! I really wanted to purchase the condo but the underwriters couldn't accept that high delinquency. Are there any other lenders you know who would accept that high delinquency?
0 votes
, ,
Wed Jul 27, 2011
Oops, saw I didn't include the link, for that blog article it's at http://www.rebeccalaw.net/2010/hoa-xray-part-1/
0 votes
George Ross, Agent, Baltimore, MD
Wed Jul 27, 2011
Hi Rita,

Are you working with an agent now? If not you really need to do that, you could have avoided this situation all together. I'm sorry to hear that you have this problem and hopefully you can get it worked out. However, I would suggest you move forward and find another property to invest in a 30% delinquency is not high because I've seen some at 50 or higher.

This does not make it a bad investment, but putting yourself in line with a knowledgeable agent who works with investor will be able to guide you through this transaction or any other avenues you may pursue. I can continue to stress this point and even some agents are unaware but being as though you made this mistake I would conclude you are new at investing and will need additional help even after the closing when in comes to renting the property, especially in DC.

Best of luck and there are a lot of great agents out there ready and willing to help, just find one!!!
0 votes
Elliott R. O…, Agent, McLean, VA
Wed Jul 27, 2011
Rita, I am in Virginia and may be able to help you. I would like to find out a few more details about the condo project and your scenario. Please contact me at your convenience. Thank you.

Elliott R. Oliva
Mortgage Banker | nmls #353884
Prime Residential Mortgage
202.681.1636 direct
eoliva@primeres.com
0 votes
David Burnham, , Washington, DC
Wed Jul 27, 2011
I would make sure the Condo board is aware that you can not qualify for a loan. One option that the board has is to write off some of there delinquencies to put them below 15%. It is possible that the condo never has written of delinquencies and could have some debts that are 3 or more years old and should just be written off.

Either way, it is an investment that you need to be cautious of. If the condo association has high delinquencies, you should expect to be paying some money to make up for some of the delinquencies.

I have a blog specifically on this topic, so you may want to check it out.
0 votes
Kivanc Senoc…, , District of Columbia
Wed Jul 27, 2011
I hope that you have a financing contingency on your offer so that you can walk away from that contract without losing your earnest money. I don't know what type of financing you are trying to get but 30% is pretty high. There is a government website that you can check which condo building or projects are approved for Fha,or fannie mae etc. Here is the link;

http://www.hud.gov/offices/hsg/sfh/faqs/atl1val.cfm#anchor73308

Good luck
0 votes
Damon J. Bro…, Agent, Upper Marlboro, MD
Wed Jul 27, 2011
Your agent & the lender should of educated you on the condo before you made the offer. Lenders can do a DU approval before hand to save you time and money. Most condos have a FHA approved list they must be on. If you need further assistant please let me know. http://www.DamonTheAgent.com
Web Reference:  http://www.DamonTheAgent.com
0 votes
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