I need clarification on condo owner-occupancy ration rules!

Asked by Anyhope?, Connecticut Tue Jul 21, 2009

We just lost our buyer because she couldn't get PMI on her loan (15% down) because our complex has less than 51% owner-occupancy. I have done a LOT of online research in the last 4 days and keep seeing an explanation of the new rules (implemented in Jan) that:

"Fannie Mae requires that established condominium projects consisting of attached units have an owner-occupancy ratio of at least 51 percent at the time the loan is originated (purchase or refinance) if the mortgage loan being delivered is secured by an investment property. Established projects where borrowers will occupy the unit or use the unit as a second home are not subject to any owner-occupancy ratios."

This is right from the Fannie Mae announcement. Am I reading this wrong? It sounds to me that if our buyer had planned to LIVE in the unit the ratio shouldn't matter.

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Tue Jul 21, 2009
Anyhope

While those are Fannie Mae's lending requirements, the important issue at hand is PMI. The PMI companies also have their insurance requirements and those don't match up with the lending guidelines.

That is a big problem these days that we have a buyer who has been approved for a mortgage, but if that mortgage is subject to mortgage insurance (PMI) we still have to keep our fingers crossed that the MI companies will provide the PMI. Sometimes it gets shot down because of property type, sometimes it comes down to the insurers having stricter credit score or debt ratio guidelines. Nonetheless it has killed a lot of deals.

Fannie Mae has no authority over the PMI industry, so that is why you're having that problem. The only solution would appear to be getting them to put 20% down so they are not dependant on PMI.

Good luck
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Dallas Texas, Agent, Dallas, TN
Tue Jul 21, 2009
You are best review HOA regulations and speak direct with mortgage broker. It has always been the rule for multi family dwellings certain % had over and above in order for buyer purchase. I am careful as a listing agent verify info. OR buyer confirm I realize odds obtain a loan or sell is slim to none.

IT'S is not a new rule.

Sorry hear about this. ~

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