MANNY KAGAN’S
EDUCATIONAL COURSE ON CONDOMINIUMS KICKS OFF!

As earlier announced, this morning I launched my new video course, “Condos with Manny Kagan: Classes by a Mortgage Broker”.

It would be fair enough to say that most people know what condominiums are, but not many know how they differ. Those who own condos or are planning to buy one, may not know that the property’s condition can affect financing. This includes owner vs non-owner ratio, as well as HOA budget and Master Insurance.

For starters, there are two types of condominium projects — warrantable and non-warrantable. Warrantable condos are approved by the two government sponsored enterprises – Fannie Mae and Freddie Mae, as well as government guaranteed financing through FHA and VA. To be warrantable, at least half of the units in the building must be owner-occupied. In addition, the community must contribute at least 10% of its annual budget to its reserve account every year. And what if the number of the non-owner units went up through the sale or just because some of the owners moved out without selling their unit and decided to rent? Or if the contribution to the reserves is less than 10%, or the HOA account is underfunded?

In these cases, the property would transition from being approved to the “unavailable” list. This means that yesterday this project was eligible to get a specific mortgage with the minimum down payment and lower interest rate, and now it is not. And the only way to find out about this is to request one of the lenders who can sell loans to one of the government agencies, to check the list in Condo Project Manager – CPM™. There are a number of problems that would put a condo project on the “unavailable” list, such as a lack of insurance coverage, or maintenance issues. If the building has balconies, they need to be inspected; and if necessary, repaired. Therefore, before we start, we need to check the list.

And this is exactly what we do before anything else. Fortunately, the status can be changed if the corrections are made, but this might take some time. Thus, to sell or to buy the unit in a particular condo project, we need to find out to which category project belongs, and the clients’ ability to get financing. This in turn requires determination which lender or program can be used. However, before we can do that, the listing  agent has to order “Home Owner Association Information Request” – and this might take some time…

To be continued next Wednesday, January 15, 2025

Manny Kagan,
President,
Pacific Bay Financial Corporation

Cell: (415) 225-7920
Email: [email protected]

NMLS #205637
DRE #00874630