By Amy Cairn – Senior Loan Consultant at Academy Mortgage Corporation
Due to Park City’s resort nature, getting a loan for a condo can be tricky. There are basically three types of condos: Warrantable (can get a conventional loan), Non-Warrantable (does not qualify for conventional loan), and Condo-Hotel (just like it sounds, it is part of a hotel). Here are some of the basics on resort condo financing to consider.
When a property is identified for purchase the first step is to determine which category it falls into. This is done by researching the legal description (is it a condo, town home, planned unit development, etc.). In Park City, it may look like a condo from the outside, but it is legally a townhome or planned unit development, so different loan guidelines apply. The lender will look up the condo project on the Fannie Mae and FHA websites to see if it is approved by either entity. The project is checked to see if it is on any lender’s “Do Not Lend List”. Next, the loan officer will Google the property and looks for any association with nightly rentals, hotels, on-site check in desks, and hotel type amenities. This creates an idea what some of the challenges this property will have.
Next, the HOA fills out a condo questionnaire. There is a limited review and a full review.
Limited review: primary home or second home, 80% or less loan to value, established condo projects, approval done by underwriter, no occupancy ratio requirements, no more than 15% owners late on HOA dues. There is not a fee for this type of review.
Full review: primary, second home and investment, 80% or more loan to value, 51% of project owner occupied or second home for investment property, 10% of budget for reserves, no single entity can own more than 10% of project, established and new projects, no more than 15% owners late on HOA dues, and approval done by condo department at a fee of $350.
Here is a brief list of items that make a condo non-warrantable:
- managed as a hotel
- hotel conversions
- hotel or motel in name
- onsite registration AND nightly rental
- restrict occupancy
- 20% + of space is not residential
- single entity owns more than 10% of project
- HOA in pending litigation.
If a condo is warrantable, the buyer can get a conventional (normal) loan with 20-25% down, fixed rate or adjustable rate at current market rates. If the condo is non-warrantable or is a condo-hotel the loan will have to go to a portfolio investor. They typically require 20% down for primary and second home, 40% down for investment and only have adjustable rates available (3,5, and 7 years). The rates are usually 1%-2% higher than a conforming loan.
Feel free to contact me for more information or specific questions.
Senior Loan Consultant (Cairn/Hoyt Team)
NMLS ID: 294849 License #: 5460939
Company NMLS #: 3113 State #: 5491140
Amy Cairn is a local mortgage broker who intimately understands the intricacies of the Park City resort real estate market, and in particular, Condo Financing. She can broker loans, or write her own loans. Amy is approachable and dedicated to my buyer clients. She works tirelessly and consistently goes many extra miles to satisfy endless underwriting conditions, evening closings or initial client meetings on weekends. As a guest blogger, here she speaks to some of the fine points of condo financing in Park City.