Run, don't walk away from 'unsellable' purchases
Jessica White/DC Columnist
Issue date: 5/11/08 Section: Business
Lending and mortgage insurance guidelines (Fannie Mae and Freddie Mac control the bulk of lending guidelines, and FHA and VA "loans" are actually not loans, but mortgage insurance from the government for the lender who makes the loan) in this market have tightened, but even under the old guidelines, a condominium building that is part of a majority rental project would never have qualified for financing under anyone's guidelines. Even when the market returns to its pre-meltdown status, I do not think lenders or mortgage insurers will accept a condominium with a minority of owner occupants.
The lenders who are doing loans now have some sort of deal with the condominium developer. That deal will end once those units are sold, leaving you holding the bag. Maybe if you got an assumable mortgage, someone would take over your property when you are ready to sell. Another scenario would be finding an all- cash buyer, but I am assuming you are a first-time home buyer and that your sales market will also be first-time home buyers. First-time home buyers are not the all-cash market. People can generally pay all cash for a property when they sell a property with enough equity to buy their new property, which is often smaller or in a cheaper locale than the property they sold (think retirees who owned their home for 30 years and are moving to Florida).
Can they require you to use their lender? If you want this condominium, and no other lender will do the loan, then you have no other alternative.
My advice is to keep on looking for another condominium, one that has a majority of owner occupants and limits the number of rentals to a small percentage of the project. I would not only walk away from this project, I would run. Best of luck.
Jessica White, also known as "Ms. Mortgage Maven," is a mortgage consultant with Tenacity Mortgage. Call or email her to discuss your home purchase or refinancing needs. She can be reached at 202-607-4449 or Jessica@msmortgagemaven.com. You can also apply online at www.msmortgagemaven.com.
The lenders who are doing loans now have some sort of deal with the condominium developer. That deal will end once those units are sold, leaving you holding the bag. Maybe if you got an assumable mortgage, someone would take over your property when you are ready to sell. Another scenario would be finding an all- cash buyer, but I am assuming you are a first-time home buyer and that your sales market will also be first-time home buyers. First-time home buyers are not the all-cash market. People can generally pay all cash for a property when they sell a property with enough equity to buy their new property, which is often smaller or in a cheaper locale than the property they sold (think retirees who owned their home for 30 years and are moving to Florida).
Can they require you to use their lender? If you want this condominium, and no other lender will do the loan, then you have no other alternative.
My advice is to keep on looking for another condominium, one that has a majority of owner occupants and limits the number of rentals to a small percentage of the project. I would not only walk away from this project, I would run. Best of luck.
Jessica White, also known as "Ms. Mortgage Maven," is a mortgage consultant with Tenacity Mortgage. Call or email her to discuss your home purchase or refinancing needs. She can be reached at 202-607-4449 or Jessica@msmortgagemaven.com. You can also apply online at www.msmortgagemaven.com.
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