Condo financing and Warrantability

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Condo financing and Warrantability
more buyers sell out faster at higher prices
For further information contact Paul
Luykx pluykx_at_rcn.com Phone [phone]
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Prospect Mortgage

• The nations largest independent direct lender
• The nations largest independent direct lender.
  Read more
• Fannie Mae, Freddie Mac, FHA/VA, USDA, other
  (niche) programs.
• Residential and Commercial.
• Seeking partnerships with developers and realtors.

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Condo financing

• The nations largest independent direct lender
• Financing for- Property acquisition-
  Construction, rehab, condo-conversion - Buyer
  (sales) financing
• Road Map for Warrantability to ensure
  availability of buyer financing.
• Marketing and sales collaboration.
• Loan origination and smooth closings.

more buyers sell out faster at higher prices
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Warrantability, a critical issue
A condominium or condo-conversion development
is warrantable if it has features that lenders
view as protection against hazards that threaten
the value of the units
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Some things that impact Warrantability
(in no particular order) of (pre)-sales Marke
t conditions and absorption Proven demand for
units Owner occupancy ratio Investor ownership
ratio HOA finances HOA control Builder
warrantees Completion of common elements Phasing
and add-ons Commercial space of units in
project or phase New construction or
conversion Gut rehab, non-gut rehab
conversion Marketing/sales programs Builder
reputation/experience Legal aspects Architects
report Quality construction Engineers
report Legal document requirements Phase at time
of application
more buyers sell out faster at higher prices
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What is the problem?

• The rules are complex, and change all the time.
• The requirements of Fannie Mae, Freddie Mac and
  FHA/VA (more than 95 of all condo loans)
  increased, and now strictly applied.
• Lenders used to have flexibility with respect to
  warrantability, and non-warrantable finance
  options were readily available. This is no longer
  the case!
• Lenders have additional property criteria.
• Additional borrower criteria. (Minimum credit
  scores affecting LTV, PMI, interest rate, other).

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Warrantability is not specific

• Different rules depending on project
  characteristics.
• Different rules as the development progresses.
• Different rules for different lending programs.
• Rules change all the time.
• Some rules are subjective (opinions of decision
  makers).

more buyers sell out faster at higher prices
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Possible implications of non-warrantability

• No buyer financing can be obtained - at all! (If
  you think this is not true, just google it).
• No buyer financing can be obtained until the
  project is complete, or nearly complete, and even
  then there may be sales-stopping limitations.
• Buyers may only be able to get a non-warrantable
  condo loan at a (0.50-2.00) higher rate.
• Loans at more than 80 loan to value may be
  difficult, or impossible to obtain.

more buyers sell out faster at higher prices
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If the project is warrantable

• Mainstream mortgage programs available at market
  rates.
• Higher loan limits (up to 729,750 per unit) may
  apply.
• Financing to 80-90-95-100 LTV.
• More options for hard to place loans available.
• Financing can be effectively included in
  marketing/sales promotions, and deal structures.

more buyers sell out faster at higher prices
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Warrantability is always temporary

• Re-approvals are required - or may be desirable
  due to
• Construction/rehab progress.
• (Pre-) sales (as often as with every single
  sale)!
• Approval expirations.
• Other events.

more buyers sell out faster at higher prices
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What to do

• Warrantability drastically increases
  marketability!
• Planning, and a pro-active stance is critical. It
  should start as early as property acquisition.
• Position the project to become warrantable at the
  earliest opportunity.
• Ensure continued warrantability and availability
  of lending programs to enable marketing/sales.
• Develop alternate buyer financing options where
  warrantability cannot be (initially) secured.

more buyers sell out faster at higher prices
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Why partner with us

• Remove the barriers and create opportunities!
• A direct lender with a dedicated team of condo
  financing specialists.
• Planning assistance and management of the Road
  Map for Warrantability.
• Development of alternate buyer financing options
  where warrantability cannot be (initially)
  secured.
• Marketing and sales collaboration.
• Buyer financing and smooth closings.

more buyers sell out faster at higher prices
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Contact
Remove the barriers and create opportunities!
Paul Luykx paul.luykx_at_prospectmtg.com 800-405-06
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more buyers sell out faster at higher prices