The process of owning and maintaining a condo has shifted throughout recent years in Massachusetts for condo owners and homeowner associations due to tighter lending policies. Here is everything you need to know about mortgage eligibility changes and how to prepare.
HOAs & Applying for a Mortgage in General
Applying for a mortgage, in regards to a condo, can have a different outcome than for a home. The required HOA fee could influence the ability to apply for a mortgage as it shifts the debt-to-income ratio. When someone fails to keep up with HOA fees, it can violate the terms of the mortgage. It’s important to always have open communication with a mortgage banker about how HOA properties can affect finances and the ability to secure lending.
Fannie Mae & Frannie Mac
Fannie Mae and Frannie Mac are two key federally chartered entities that purchase mortgages. Recently, their focus has changed to view the physical condition of condo buildings before granting mortgage approval. This process is more rigorous than ever before as their ongoing partnership with mortgage lenders is crucial to assess properties.
How Does this Affect Condos?
To receive a loan for a condo, the building and property will be up to code and will not require critical repairs. Also, there is a limit on insurance deductibles in order to protect against large costs that might deter financing.
Here are just some of the questions asked on HOA questionnaires in regard to mortgage lending:
- When was the last inspection or reserve study completed? If it is within 3 years, you must provide the report.
- Did the last inspection have any findings related to the safety, soundness, structural integrity, or habitability of the project’s buildings? If yes, have the recommended repairs/replacements been completed?
- Are there any critical repairs and any routine repairs to be completed, and is funding available?
- Does the HOA have a funding plan for deferred maintenance or required repairs?
How HOAs and Condo Owners Can Adapt
Know and Understand Lending Guidelines
Property management companies, like Thayer & Associates, understand lending guidelines so we can ensure that your HOA makes the right financial decisions for the future of the condo association.
Strategic Planning and Budgeting
Every year, HOAs should strategize their plans by creating a yearly budget where routine maintenance, repairs, and a reserve fund are included. When this budget is created, your HOA can avoid issues with fees while also making your property more attractive to potential future buyers.
Communication
The meeting and financial plans of an HOA board should always be transparent for potential buyers and current residents. This will help provide insight into your property’s financial health. Every condo owner has the right to share their thoughts and help make decisions for the future.
Mortgage lending can be a complex process with condo properties. Let Thayer & Associates help you work through any questions you may have as a condo owner or as part of a homeowner’s association.