Condominium lending has become tight to say the least. When my agents are selling Boston condos they tell me the biggest reason why deals fall apart is because of financing. Even with a pre-approval, a big down-payment and good credit, many borrowers are finding closings to be delayed or not possible because of the property they are buying.
Fannie Mae and Freddie Mac have tightened the condo borrowing regulations to try to limit risky lending on the segment which has seen a high chance of foreclosure over the past few years. Other risks for condo lending include special assessments and high condo fees which can cause an owner to fall behind on their payments. This was recently seen at the Harbor Towers complex on Boston’s Waterfront where condo owners were assessed from $80,000-$500,000 per unit for major renovation projects.
Unfortunately, the majority of the real estate market in downtown Boston and it’s surrounding neighbors is made up of condos. Single family homes in this area are few and far between and few can afford them.
Another FHA new regulation for condo lending affecting many new construction condo projects like FP3, W Boston, 45 Province, and The 1850 is that 71 percent of the project much be sold or under agreement to people planning on owner occupying the units. The project can appeal for a waiver if Fannie Mae officials rule that the project has a strong chance for success.
As if these problems weren’t enough, now PMI (Private Mortgage Insurance) companies who traditionally would insure the loans of greater than 80% are now requiring that buyers have a minimum of 10-15% down. Prior to this, borrowers could put 5-10% down and still obtain financing.
With all of these new regulations, it helps to work with an educated Boston buyer’s agent when planning on buying a Boston condo. If you have more questions or would like to be referred to some of our banking partners, please contact a Warren Residential Group agent at contact@warrenre.com or 617-848-9616 ext. 1.
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