While a good portion of the condo fees everyone pays go towards maintenance of the offered amenities, the condo association will also use some of those monthly fees to purchase a master insurance policy for the entire property. As an example, this would help cover the legal fees that could ensue if someone were to get hurt using the shared pool. Lenders have different requirements for this. The underwriter will review the master insurance policy to ensure that it is adequate to qualify for the loan. With a condo, it’s not just the buyer that has to be approved — the entire condo complex has to be approved for a loan . This makes it far more challenging to get condos approved than standard properties. Similarly, if the association is involved in a lawsuit at the time of the loan application, the loan may be denied. The lenders don’t want the risk of lending on a property that could have problems from a condo association lawsuit. Lenders will also inspect the condominium complex amenities to ensure that they are in good shape. If the complex is in disrepair, that points to two issues: the safety of the residents is at risk, and the condominium association is not spending its money effectively. This could also result in a rejected application. Speaking of the condo association’s money habits, another problem area of condo loans is how much money the condo association has saved. If the association does not have enough money in reserves according to the lender’s requirements, the loan may be denied. Likewise, if 15% o , if 15% or more of the condo association members are behind on their condo association dues, that could also lead to a rejection. Again, all these problem area don’t mean that getting a loan for a condo is impossible. Clearly, people get loans for condos all the time. However, a loan officer who’s never obtained a mortgage
60
Powered by FlippingBook