First of all, just so you know, two separate entities must qualify in order to obtain financing on a condo or townhouse.
- The Applicant- YOU – Before you apply be aware that they will look at your income, credit, employment history, other assets and debt including charge card balances.
- The Community– Before moving to far ahead in the process you may want to check these things out. The Homeowners Association (HOA) is probably the best source to find out answers to some of these questions.
Is it FHA, VA approved? Have the approvals expired? Are there any pending lawsuits or litigation of any substance? (sometimes they will overlook a simple slip and fall lawsuit.)
Does any one individual owner more than 20% of the units? If so it may fall under “unwarrantable” which means the loan will not be approved or your rate and terms will be higher than normal since it the lender feels it may be a more risky loan.
In new construction units lenders want to make sure that at least half the units are occupied by their owners. If there is commercial space within the community (stores) only a certain percentage can be commercial vs. residential use.
Also, the lender looks to see if there are any additional phases to be built in the future.
Review insurance coverage that the association has in place insuring that there it is sufficient to cover liabilities such as a pool, gyms and common area.
The lender may even look at the Reserve Fund to insure it is being properly funded.
The lender can get most of the answers to the above question from a HOA Questionnaire supplied by the HOA or management company.
When all the stars align then you can obtain financing, but plan on doing some homework first.