As you may have already heard, effective June 5, 2018, Fannie Mae announced many updates to their condo?approval guidelines that will now loosen the requirements for “warrantable” condos.? Effectively, these changes will allow many condos that would otherwise be considered “non-warrantable” with higher interest rates to now be “warrantable” and approved with lower interest rates.?And lower interest rates equate to smaller monthly mortgage payments.
Highlights are as follows:
Single Entity Ownership
- 2-4 unit projects – no max or restrictions.
- 4-21 unit projects – single entity ownership remains at 2 units max (no change in this segment.)
- 21+ unit projects – single entity ownership is capped at 20% (increased from 10%.)
- Also note that single entity ownership can go up to 49% in cases when an investor unit is being purchased by an owner occupant.
?Increase commercial space to 35% (up from 25%.)
?Investment Property Transactions
?Allow investor transactions to be eligible for “Limited Review” when a 25% down payment is made on the unit.
- A Limited Review condo approval simplifies the review and eliminates the need to have 51% owner occupied. Hence, an association could be considered 100% owner occupied if investors are putting down 25% or more.
- A limited review also eliminates the need to review budget and reserves.
Two- to Four-Unit Condo Projects?
?Waive project review requirements, with the exception of some basic requirements that still apply.
- No project review means no owner occupancy or single entity ownership requirements AT ALL.? This even applies to a 4 unit project that is 100% investment owned and with one entity owning 3 out of the 4 units. Crazy!
- No “gut/non-gut conversion” requirements will apply on 2-4 unit projects, hence no engineer/architect reports, etc.
- The “basic requirements” that all 2-4 units projects?must adhere are straight forward.?Basically, it must not be?a houseboat, condotel, timeshare, etc.
This is big news! Please reach out to Bob with whatever questions you may?have about these recent changes and what he can do to help with these favorable new rules for people purchasing condominiums.
Sr Mortgage Banker
Leader Bank, N.A.
50 Mall Road, Suite 110
Burlington, MA 01803