How Condo Financing Differs From Home Loans

Condo Loans Lahaina HIWhat you need to know about your loan if you buy a condo instead of a home.

To young, first time homebuyers, buying a condo can be very attractive.  They are on average less expensive than homes, come with amenities such as a community gym and pool, and often have added security and are safer environments for young children to play.

But there are some hidden aspects of condos that buyers don’t foresee when perusing the market, such as monthly fees for common area upkeep and association management.  Loans for condos can also be tougher to get, especially FHA loans. But don’t worry, information is power! Here’s what you need to know:

Underwriting for Condo Loans

Your lender is looking for two things when you ask for a loan.  The first is if you are able to repay the loan through your income and credit standing.  The second is an assessment of the property you are looking to buy.  This is because, if you default on the mortgage, the lender wants to know if it can recover its money by selling the property.

With a home loan, the process is more straightforward.  The lender appraises the property and make sure that the title is clean and no one else can claim ownership of the home.

With a condo, the process is a little trickier.

-The standing of the other condo owners within the homeowner’s association will be considered.  If other condos are in foreclosure or stopped paying their condo fees, it doesn’t look good.

-Condo documents are appraised. These are a legal agreement that each condo has and they all differ.  Your lender will do their homework to look for any warnings that this is a “bad” condo.

-The lender may also use the amount of vacant condos as an indication of how desirable these condos are.

There are many factors at play when your lender decides if the property is a risk or not.  Because of this, it’s tougher to get approved for a condo loan. Don’t despair, though! If you still want a condo and are looking for a loan, do your research and arm yourself with knowledge and preparation for what your lender will need from you. Or simply contact Avis Lending in Irvine, California and Lahaina, Hawaii for all of your condo buying needs!

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