Richard recently described the currently mortgage for buyers and sellers of new construction condominiums - (stop me if you've heard this before) - things are getting tougher.
All too often, I see "lesser" lenders who neither understand these market changes, or simply choose not to adapt or are slow to change when they occur wait. Such lenders tend to wait until week of closing to begin the process of trying to secure condo project approval. Inevitably, delays ensue, frustrations rise-up, and good will is lost. In the worst cases, lender delays have cost buyer's money in the form of delayed-closing penalties or the loss of earnest money.
In the last several years, buyers of new condo projects had little difficulty in obtaining loans. It didn't matter if the condo was warrantable (in essence: certified by the lender that the condo meets Fannie Mae/Freddie Mac condo guidelines) or non-warrantable (not certified to the guidelines). A buyer could be the first one in the complex and have no issues.
Things have changed in the last 30 days. Because of the losses in the market, Fannie and Freddie have gone back to the old days. For new construction, depending on the project, loan, and other factors, a buyer will probably have to wait until the appraisal has been performed,a condo questionnaire has been completed, and, in some cases, the lender has reviewed other documents such as the condo budget, decs and bylaws, etc.
It is going to be more difficult and time-consuming to fully approve condos. It's not the loans, but the condos themselves.
Here's my two cents how to work with this:
- Buyers should ask their loan officers if they are aware of the changes. If they get a blank stare, find another lender.
- Agents should make sure that they have the various docs ready to send to the lender for review.
- Both buying and listing agents should make sure that the lender can do both warrantable and non-warrantable condos.
- Listing agents and developers might want to have a preferred lender who can have the entire project warranted so that prospective buyers have a guaranteed lender.
I've long counseled clients to make sure they are working with knowledgeable, experienced, aggressive lenders, and to start the mortgage application process as early as possible on the timeline of a real estate transaction. This is just another example of why I do so.