Buying a condo with a mortgage may soon get more complicated. Here's why
New policies that apply to mortgages for condos take effect Aug. 3, and some experts are sounding the alarm that buyers may see delays or denials.
As of August 3, Fannie Mae and Freddie Mac, two government-sponsored enterprises that purchase qualifying mortgages on the secondary market, will require lenders to scrutinize condominium associations more closely. While lenders already review condo associations in many cases, the new policies mandate a more thorough examination of the association's financial health, reserve funding, and building maintenance for specific transactions.
The changes aim to identify condo buildings with financial or structural issues and minimize the risk of unexpected special assessments or increased association dues for owners. However, some industry experts warn that the new requirements may lead to delays in mortgage approvals and potential denials if condo buildings fail to meet the new standards.
Dawn Bauman, CEO of the Community Associations Institute, predicts that the stricter review process will make it more challenging to purchase a condominium, as roughly 40% of condo purchases involving a mortgage currently use a limited review process.
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