A very knowledgeable lender here has been kind enough to bring us up to date on the favorable changes that Fanny Mae has recently announced for financing condo purchases. Hopefully this explanation will shed light on this sometimes confusing subject and make it more understandable.
There are three condo classifications:
- Warrantable Condominiums: Owner occupancy is OVER 50%, no front desk, no hotel license or affiliation.
- Non-Warrantable Condominiums: Owner occupancy is UNDER 50%, no front desk, no hotel license or affiliation.
- Condotel: Resort style properties with front desk check-in, hotel license or affiliation.
Until recently, there was no conventional financing on non-warrantable condos (which is the classification for most Princeville condos). These and Condotels were usually relegated to Portfolio or private lenders that charge higher down payments that only offered hybrid loan products with a 3, 5, or 7 year fixed with adjustable rates for the remaining term.
Fannie Mae (FNMA) is now allowing for Limited Reviews on primary and second home purchases of non-warrantable condos. Limited Review basically is the condominium questionnaire that does not require the condominium management company to report current owner occupancy levels. Limited Reviews now open the door for low occupancy condominium projects to offer 30 year fixed rate products at current rates.
Limited Reviews require a minimum of 10% down payment on owner occupied units and 20% down on second home occupied units.
It is important to understand that this program does not allow for Limited Reviews on investment property unit occupancy.
Hopefully this has helped explain the variables in securing financing for the condo of your dreams.