The Lee County Association of REALTORS hosted a Professional Update today at the new REALTOR building. The topic was condos! Auburn loves condos, and we have plenty to sell, so this was some very useful information! The panel of professionals included Nancy Davis – Davis Law Firm, Molly Wilson – Wilson Appraisals, and Barry Jones and Jane Perry – WR Starkey Mortgage.
As always, these professionals had great information and advice to offer to the Lee County agents, and I would like to pass along some of this information to you – in the event that you may purchase a condo in Auburn in the near future. Below are a few pointers that I found interesting and important when it comes to a condo purchase.
1. As a purchaser of a condo, ALWAYS request and READ a copy of the condo documents, the plat, and the condo association budget, so you are aware of what financial obligations you may have in the future.
2. Prior to making an offer on a condo, be sure to know what type of financing is available for the condominium complex – Conventional and FHA financing is only available for approved condo complexes through various lenders. It is extremely important to know if the condo complex you are purchasing is approved and through what lender. Approval for a conventional or FHA warrantable condo can take up to 60 days, and just because a condo was approved in previous years doesn’t mean that it is approved today. FHA requires that condos go through the approval process every two years. See my notes below concerning warrantable condos and financing!
3. All lenders are required now to request that the purchaser of a condo provide evidence of interior content insurance. This is not the same as renter’s insurance. It covers, from stud to stud, the amount of money it would take to re-construct the interior of the unit if there were a disaster. It is recommended to purchase this insurance through the same insurance provider as the condo association uses for exterior insurance.
4. As a condo purchaser, be aware of whether or not you are purchasing a true condo or a land condo. A land condo requires that all of the home owners take care of additional items in the development, such as roads, sidewalks, etc., because they are owned by the condo, not the city.
5. When receiving a condo appraisal, know that the appraiser is expected to use comparables within 90 days of the sale, and that the measurements are walk to wall on the interior, not the exterior. Also, the appraisal may oftentimes be required to use comparables that are outside of the development so don’t let that be a surprise!
6. Lastly, know that the lending environment for condos is a little different these days. Condo approval can take up to 60 days with various lenders, and the lender will have to work with the condo management company to ensure that all proper documentation is provided. Expect 60-90 days for a closing on a condo that is not yet approved for conventional or FHA financing.
A note on financing and warrantable condos:
Many condo purchasers in Auburn, AL are purchasing for a child to attend school. In this instance, “kiddie condo” loans are favorable. This is a loan where the child is on the loan as the primary residence, and the parents are also borrowers on the loan. The child does not have to have credit history in this instance. I recommend speaking with one of my listed preferred lenders for more information on these loans.
There are three types of loans for condos: Conventional, FHA, and VA. VA only approves condos on an as needed basis, one at a time, so the approval process for a VA loan will begin upon submitting the contract to the lender, and lender will work with the management company to provide the proper documentation. Once again, remember this can be timely.
Conventional loans for condos are backed by FANNIE MAE. They can be 5% down for a primary residence, 10% down for a second home, or 20% down for an investment property. FANNIE MAE has very specific guidelines for condo approval, in order to provide a condo loan. There is a “Homeowners Association Certification” form that the condo association manager must fill out in order to get condo approval for a conventional loan, and this is done on a case by case basis for the lender. FHA, on the other hand approves condo complexes for all lenders, but they are required to renew their approval every two years. FHA condo approval can be submitted by a lender, a condo manager, or a condo association. Once FHA approves a condo for a loan, it is approved for all lenders in the designated time period (2 years). FHA requires 3.5% down for the condo loan and is the best option for the “kidde condo” type loan.
Of course, all of this information is subject to change with today’s volatile market, but as of today, this is valid information. Any of this can be verified with Barry Jones at WR Starkey Mortgage (he’s on my preferred lender list).
I look forward to helping you list and buy condos this coming spring and summer! There are plenty to chose from, and between now and then, many of the our local agents, including myself, will be working with Barry to gain FHA approval for the majority of condo developments throughout Auburn!