Condos tend to be a missed opportunity for property investors due to their (previously) strict financing guidelines. As home prices continue to rise, more Americans are choosing to rent or purchase property that’s conveniently located within major cities. With this in mind, it may be a wise move for real estate investors to explore the possibility of purchasing a condo project. Recently, Fannie Mae and Freddie Mac have eased the requirements for condo financing, potentially making this type of real estate a more economical and attainable choice. Here’s what you need to know about the updated guidelines:
An Increase in Allowable Commercial Space Concentration
As the demand for mixed-use developments increases, Fannie Mae and Freddie Mac have responded to industry feedback by allowing an expansion of commercial space concentration. Instead of the previous allowable concentration of 20%, those seeking condo project financing may now have a commercial space concentration of 35%.
Since condos are expected to become a mainstream type of housing, lenders have chosen to offer more flexibility for loan seekers. Until the revision of the rules, Fannie Mae and Freddie Mac required a stringent review process and few opportunities for waivers. As more developers are exploring the possibility of condo projects, an increase in flexibility makes the process simpler for all involved. For condominiums with at least 21 units, single-entity ownership limits will increase from 10% to 20%. To learn more about the changes to single- family project eligibility, please visit this website.
Limited Condo Reviews
In the past, limited project reviews were not an option for investment properties. Under the new guidelines, condo projects may be eligible for limited project reviews. With this updated eligibility guideline, projects should be primarily used for residential purposes and meet local zoning requirements. In addition to these guidelines, the loan to value for investment properties must be 75% in order to qualify for a limited project review. Among the best news about Fannie and Freddie allowing a limited review for an investment property is that the percentage of owner occupied units versus rental units will no longer be an issue. This revision will allow investors to purchase condos and have competitive fixed rate options rather than an adjustable rate mortgage. To view the newest eligibility requirements outlined by Fannie Mae, head over to this website.
As Fannie Mae and Freddie Mac ease condo financing requirements, expect to see more modern condominiums popping up throughout the country. These two lending entities are responsive to industry and customer feedback, as reflected by other recent changes like the increase in general loan limits.
By Michaela Phillips, Guaranteed Rate Inc. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517,
e-mail firstname.lastname@example.org or visit michaelaphillips.com. NMLS: 312874.