Why Buying a Condo Can Be Tricky
Let’s Set Some Expectations Up Front
Buying a condominium in Philadelphia in 2013 can be more difficult if you are financing the purchase. Many lenders will have more stringent requirements on both the borrower & the building. It’s important as a buyer to be aware of these issues up front so you & your agent can work together to make your transaction as smooth as it can be. This is where it helps to hire an experienced agent.
Requirements on the Borrower
Borrower has control over these aspects & are able to do their due diligence before they begin their search.
1. Excellent Credit
2. Steady & Documented Income
3. Higher LTV Ratio (This means you may be required to put 20-25% down.)
4. Must Qualify for the Mortgage Payment Along with Any HOA Fees (Can diminish your purchasing power significantly.)
Requirements on the Building
Unfortunately the borrower has little to no control over these aspects & are dependent upon correct information being disclosed to them by the seller, selling agent or in house sales office.
1. 50% or More of the Building is Owner Occupied
2. A Single Investor Does Not Own More Than 10% of the Building
3. Cannot Have 15% or More of the Owners Delinquent on HOA Fees
4. There Is No Pending Litigation or Special Assessments
5. Adequate Insurance & Capital Reserves
These are not the ONLY requirements just the ones we see most frequently. You do not always have to put down 20-25%, however, it is important to do some research & due diligence up front if you plan on a lower LTV. If a building is on the FHA approval list it can be searched through the HUD website. If it is not on the list; it is generally considered non-warrantable. We have a few lenders that we have worked with who have special programs specifically for non-warrantable condos.
Moral of the story: a little work up front can save hours of frustrations later.