The word is out in the real estate world…I’m hearing the question all the time from agents. Katie Anderson recently asked me, “I’ve heard that only a 5% down payment on condos is coming back. Neena is this true?” Yes these low down payment loans ares coming back into the market?guidelines are loosening up!
The New Rules for 5% Down Payments
The general guidelines to be aware of for 95% conventional condominium financing are:
- The entire condominium project must be “100% complete,” which means that the building and its elements must be completed.
- At least 90% of the units in the project or phase must be sold and conveyed to unit owners.
- All facilities related to the subject property must be owned by the homeowner?s association.
- No single entity may own more than 10% of the total units.
- No more than 20% of the total building square footage can be used for non-residential purposes, which means no more than 20% of a building can be commercial space.
- No more than 30% of the units in the subject property may be owned by investors.
- The person taking out the loan must have 5% of their own funds to put towards the real estate purchase, the borrower cannot get a gift for the down payment
There are Limits to the 5% Down Payment Option
You need to be aware of some types of projects that do not meet guidelines:
- Condo-hotels and timeshares
- Kiddie condos (when a parent buys a place for their child for college and the student has no income but is on the loan)
- Condo Associations that are in a law suit
So, there are limits, but it is possible for people to now go out looking for a particular type of condo that they can buy with a lower down payment. Listing agents should be paying close attention to these rules and checking to see if their listings meet the requirements. If they do…market accordingly!Email This Post To a Friend.