Condo’s in the Santa Clarita Valley – Stress Free Mortgage

For many first-time home buyers, purchasing a condominium versus a house is often times the only choice based on affordability. While purchasing a condominium maybe the most affordable solution, there can be some pitfalls and challenges when purchasing condos. In our most recent experiences, many of the condominium’s that are available are also having issues with their insurance for the entire condo project. When a condominium complex doesn’t have enough of the required insurance coverage for a conventional loan, then obtaining a loan becomes more challenging.
Let me clarify what happens at the lending level. There are lenders that will still do a loan in this situation, but they won’t have the same rates, costs and down payment requirements that a conventional loan would. A conventional loan will allow a borrower to put in a down payment for as little as 3%-5% of the purchase price. This scenario often occurs when borrowers are comfortable with a certain monthly payment but are limited in funds for a large down payment.
When we are brought in to do a loan on a condominium that does not have the right insurance, the loan changes in how the condo is viewed by lenders. Lenders call condominiums that do not meet conventional standards “non-warrantable condos.” On non-warrantable condos, buyers are likely required to have to put in a down payment of 25-30%. Additionally, the rate can be higher by one or two percentage points as well as the cost of the loan is higher and, in many cases, points will be paid for this type of loan.
There are still many condos available to purchase that do not have an insurance issues and are warrantable, but my advice is to address this with your realtor and request they check with the listing agent for the documents to review ahead of time. This way, you are fully informed before falling in love with a property but can’t get a conventional loan.
For more information call Stress Free Mortgage: 661-295-0555.