Are there any lenders that will take a 5% down payment and not look at the condo reserve budget?

Asked by Condobuyer, Boston, MA Wed Aug 8, 2012

I was all set for a loan with 5% down and no MI. After reviewing the condo's financial documents, the lender saw that only 1% of the condos budget goes towards reserves. My lender now wants me to increase my down payment to 10%. Is there any way around this or any lenders that won't have that requirement?

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Carey T. Han…, , Massachusetts
Thu Aug 9, 2012
I saw your post and would be more than happy to help you out. Give me a call anytime. Thank you.

Carey T. Hansen
"Your Real Estate Agent today, tommorow and into the Next Generation"

NextGen Realty
1243 Commonwealth Ave.
Allston Ma 02134
Phone: 617-548-7236
Fax : 888-875-6973
Licensed Real Estate Professional
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Jane Becker, Agent, Worcester, MA
Thu Aug 9, 2012
Lenders are investors and they are there to lend money, not own real estate. Lenders perform their due dilligence by researching first you and your credit and ability to pay. Then the investment. If it's a home, or a canodo, they will do an appraisal to verify that the amount you offered is valid. They will research the Condo association to make sure that they are not going to go bankrupt. That they have money in the reserves and are functioning properly.
Lenders want to have a cusion of 20% equity when you borrow the money. If you borrow less, they will ask you to insure the difference. That is wher PMI or MIP comes from. One has nothing to do with another. I believe that even if you were putting 20i% down, they might not check your income (because they have the cushion), but they will still check the real estate. Hope that helps.
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Territory.c…, Agent, MA,
Wed Aug 8, 2012
Not that I know of. Banks are very strict with their requirements these days. You can try TD, sometime they make exceptions.

Good luck!
Massachusetts Premier Buyer Brokerage
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George Wood, , Brookline, MA
Wed Aug 8, 2012
Hello Condobuyer,

Banks, when they put up the money for you to purchase, are essentially partnering with you and sharing the risk of your investment. That is why it is difficult, if not impossible, to find a lender who is willing to gloss over any issues with the condo reserves. They will usually ask the buyer to put more money down to lower the bank's exposure, but sometimes will offer a higher interest rate in order to increase their reward for taking a larger risk.

I've run into situations like this before. My question is, "how big of an association are we talking about here?" With a 2-3-unit association (which Boston and the surrounding area are full of) you see this kind of thing all the time. I have come up with ways to work around it in the past.

If we're talking about a large association having little to nothing in reserve, it would warrant a closer look. Unless a larger association just finished a substantial capital improvement that sapped the reserve I would caution my buyer that an assessment is likely in the near future. If there has been a recent, large project, an underwriter will have some leeway to take that into account when they review the budget.

Best of luck!
George Wood
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Bobby Woofter, Agent, Boston, MA
Wed Aug 8, 2012
nope. Lenders are much more cautions than they were a few years ago. Any lender will look at the condo reserves to make sure what they are lending on is stable. Your best bet is to get all the info and shop it around, and tell your guy you are going to try to find someone to do it.
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Richard Shap…, , Framingham, MA
Wed Aug 8, 2012
Probably not. Putting 5% down means PMI and PMI will trigger a full condo review. Full condo review means reviewing the budget. Budget must have a line item for reserves and must have 10% of the operating budget for reserves.

I would be happy to review that budget for you and make sure its being read correct.

rshapiro at assetmortgage dot net
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Rich Homer, Agent, NAPLES, FL
Wed Aug 8, 2012
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