3. FHA
VA
USDA
Non-Warrantable Condos
◦ Jumbos
◦ Condotels
◦ Foreign National Condo Programs
◦ Asset Based Condo Programs
4. A real estate project in which each unit owner has:
Ownership of the “Air Space” and interior walls within an
individual unit,
An undivided interest in the ownership of common elements of
the project.
Condominiums have conditions, covenants and restrictions
(CCR’s) and often additional rules (By Laws) that govern how the
individuals are to share the common areas.
(And sometimes) the exclusive use of certain limited common
areas, including the parking area, community room, pool, tennis
court, club house, and other common areas.
5. Condominium
Unit owner owns the “air space” inside the unit.
Unit owner owns an “undivided interest” in the common areas.
Planned Unit Development (PUD)
Unit owner owns the interior and exterior of the unit.
Unit owner owns the ground beneath the unit – and possible land in
front of or behind the unit.
Common areas are owned by an association of unit owners. PUD’s have
conditions, covenants and restrictions (CCR’s) and often additional rules
that govern how the individuals are to share the common areas.
6. Condominium
Unit owner owns the “air space” inside the unit.
Unit owner owns an “undivided interest” in the common areas.
Cooperative
Owner own shares of stock in a corporation which owns the entire building,
including any common areas.
All prospective purchasers must be approved by the Board of Directors.
BOD’s are permitted to request extensive information regarding finances,
employment and personal background as part of their approval process. This
process can be very time consuming.
No real estate is owned by an individual. Instead, individuals purchase the
shares of corporate stock allocated to a specific unit.
7. Attached Projects - consists of dwellings that have
one or more common walls adjoining another
dwelling. This can be as simple as a common wall
between garages. Types of projects include: garden
style, row/townhouse, high-rise, etc.
Detached Projects - consists of dwellings that are
freestanding on its own block of land. Looks like a
single family home.
8. Fannie Mae and Freddie Mac have different review
procedures for “Established” and “New” Condo
projects.
ESTABLISHED PROJECTS
90% or more of the units in the project have been
conveyed to the unit purchasers – AND –
Project is 100% complete. It is not subject to
additional phasing and/or annexation – AND-
HOA control has been turned over to unit owners
9. NEW PROJECTS
Fewer than 90% of the total units have been
conveyed to the purchaser – OR-
Project is not fully completed and is subject to
additional phasing and/or annexation – OR-
HOA control has not been turned over to unit
owners
10. The year the project was built is not
considered when determining if the project is
“Established” or “New”.
11. New Project Pre-Sale Requirements - At least 50%
of the total units in the project (or at least 50% of
the subject legal phase and prior legal phases)
must have been conveyed or must be under
contract to purchasers who will occupy the unit
as primary or secondary residences.
Subject legal phase and prior legal phases must
be substantially complete including common
elements and units (subject to the selection of
buyers preference items).
12. The project’s budget is adequate and
consistent with the nature of the project and
appropriate assessments are established to
manage the project:
◦ Appropriate allocations for line items pertinent to the type
and status of the project.
◦ At least 10% of the budget provided funding for
replacement reserves for capital expenditures and deferred
maintenance (lower amount is acceptable if supported by
reserve study – FNMA only)
◦ Adequate funding for insurance deductible amounts
◦ “Non-incidental” business income is acceptable up to 10%
of the annual budget (up to 15% on case by case exception)
13. No more than 15% of the total number of
units in a project are 60 days or more
delinquent on the payment of their
homeowners association assessments.
14. Hazard Insurance – Requirements
◦ Insurance is required to cover 100% of the insurable replacement
cost the project improvements, including the individual units in
the project. Co-Insurance is acceptable with agreed amount
endorsement or recent cost estimator/valuation report.
◦ Building Law and Ordinance endorsement is required to ensure
the building can be rebuilt according to local building laws and
ordinances (if available)
◦ Mechanical Breakdown Endorsement is required for projects that
have central heating or cooling.
◦ The deductible must not exceed 5% of the policy’s face amount.
◦ “All-In” Coverage – “Betterments and Improvements” otherwise
individual HO6 Policy will be required.
15. Liability - Requirements
The HOA is required to maintain a
commercial general liability insurance policy for
the entire project, including all common areas
and element, public ways, and any other areas
that are under its supervision.
The amount of coverage must be $1 million
for bodily injury and property damage for any
single occurrence.
16. Liability – Requirements
“Separation of Insured” or “Severability of
Interest”
FNMA requires each insured party on the
master liability policy be treated as if it were
covered by its own liability policy.
An insured party cannot be denied claims
brought against another insured party.
17. Fidelity Insurance – Requirements
◦ Fidelity insurance is required for condo projects with 21
or more units.
◦ The amount of coverage must cover the maximum funds
that are in the custody of the HOA or its management
agent at any time while the policy is in force.
◦ If the HOA and management agent adheres to financial
controls (separate bank accounts for operating and
reserve account, two signatures required for writing
checks from reserve account, etc.), the fidelity insurance
must equal at least the sum of three
◦ months of assessments on all units in the project.
18. Flood Insurance – Requirements
If a first mortgage is secured by a unit in a
condo project and any part of the
improvements are located in a Special Flood
Hazard Area (SFHA), a master flood insurance
policy is required and the premiums are
required to be paid as a common expense.
19. Flood Insurance, cont.
Coverage Requirements for Projects
◦ The amount of coverage needs to be at least equal
to the lesser of 100% of the insurable value of each
insured building (including all common elements
and property) or the maximum coverage available
under the applicable National Flood Insurance
Program (NFIP - $250K)
20. Warrantable:
Conventional (Eligible for Fannie Mae and Freddie Mac)
FHA
VA
USDA
Non-Warrantable:
Conventional (ineligible for Fannie Mae and Freddie Mac)
Jumbo
Condo-tels
Foreign National loans
Asset Based Loans
21. Streamline Review – Freddie Mac – Lender
issues approval. No Review Fee is required.
Limited Review – Fannie Mae – Lender
issues approval. No Review Fee is required.
Full Review and Condo Project Manager
(CPM) Expedited Review – Fannie Mae,
reciprocal with Freddie Mac – Lender
issues approval. No Review Fee is required.
Project Eligibility Review Service (PERS) -
Fannie Mae, reciprocal with Freddie Mac –
Approval issued by Fannie Mae. Agency
Review Fee is required.
22. Streamline Review Attached Condos (Freddie
Mac) : 10% down for owner occupied loans and
25% down for vacation loans. Project must be
“established”.
Limited Review Attached Condos (Fannie Mae):
10% down for owner occupied loans and 25%
down for vacation loans. Project must be
“established”.
(Above rules apply to all states except FL)
23. There is one key exception:
All “Detached” condos are eligible for
Streamline/Limited Review regardless of
occupancy (owner occupied, vacation,
investment) or loan to value.
24. Items required for project approval:
1. Condo Questionnaire
2. Master Insurance – Hazard, Liability (S) and
Fidelity(S) and flood, if applicable.
Review of Condo Legal Documents, Budget
and HOA delinquency is not required.
25. Full Review – Manual review process - New and Established
Projects (97% owner occupied/first time buyer) 95% owner
occupied; 90% vacation; 85% investor)
Expedited Review – FNMA’s web-based condo review
application: Condo Project Manager – New and Established
Projects (95% owner occupied; 90% vacation; 85% investor)
Established Projects - Docs expire after 6 months. Lender has
discretion of period updates to ensure compliance.
New Projects - Docs expire after 6 months (Requires review
of legal documents and presales)
26. Items required for project approval:
1. Condo Questionnaire
2. Master Insurance
3. Budget
New projects also require:
1. Condominium Legal Documentation Review.
2. Presale Data – 50% of units in project or
subject phase.
27. Project Eligibility Review Service – is Fannie Mae’s fee-
based review option which is available for any for
Condo or Coop project:
https://www.fanniemae.com/singlefamily/project-
eligibility
This review method is require for the following “new”
projects:
Newly converted, non-gut rehabilitation condo projects; and
All new and newly converted attached condo projects located
in Florida.
30. FHA
The Federal Housing Administration was
created by the National Housing Act of 1934
during the Great Depression. It’s goal was to
increase home construction, reduce
unemployment, and operate various loan
insurance programs.
FHA does not make loans, it only insures
loans made by approved lenders
31. FHA Loans are Federally Insured
Default claims are paid from a fund called the
Mutual Mortgage Insurance (MMI) Fund
The MMI is funded by two types of premiums
paid by the borrowers:
1. Up Front Mortgage Insurance Premium
(UFMIP) equal to 1.75% of the base loan
amount. This is normally financed into the
total loan amount by the lender and paid to
FHA on the borrower’s behalf.
32. FHA Insurance
2. The second insurance is the Annual Mortgage
Insurance Premium (MIP), which is paid on a
monthly basis. This insurance premium varies
based on the amortization term and loan-to-value
ratios.
Example:
A. 30 year loan term with 96.5% LTV, the MIP is
currently 0.85% of the loan amount.
B. 15 year loan term with 96.5% LTV, the MIP is
currently 0.70% of the loan amount.
33. Owner Occupied loans require minimum of 3.5% down
payment.
Down payment must be verified. All funds may be gifted.
Seller concessions permitted up to 6% of the sales price.
loan limits vary by county $271,050 - $625,500; Alaska,
Hawaii, Guam and US Virgin Islands $938,250
203K Rehab (detached condos and 2-4 unit attached condos)
Reverse Mortgage (HECM) LTV varies by age, program,
mandatory obligation, Loan limit is $625,500 nationwide.
The actual loan amount is a percentage of the loan limit.
34. Assumable
Most FHA loans are assumable, meaning the seller can
transfer their loan to the new owner when they sell
their house. (HECM Loans are not assumable)
The new owner can take over the FHA loan (and rate)
without the additional cost of obtaining a new loan.
To assume the loan, the buyer has to meet the credit
standards for the loan.
This feature can make it easier to sell a home with
FHA financing.
35. FHA Condo Requirements
Project Approval – Required for all “attached condo
projects” only. FHA Condo Approval expires every two
years. FHA approval is not required for detached
condos, streamline refinances or HUD REOs.
Lenders are required to certify, at time of loan
approval, that that there is no pending litigation or
environmental hazards and the following criteria is
met: Owner Occupancy 50% or more; FHA
Concentration 50% or less
https://entp.hud.gov/idapp/html/condlook.cfm
38. Veteran Administration (VA)
The VA Home Loan Program (G.I. Bill) was
created as part of the Servicemen’s
Readjustment Act in 1944 By President
Roosevelt to help veterans returning from
WWII.
The Readjustment Benefits Act of 1966
extended the G.I. Bill benefits to all veterans
of the armed forces, including those who
served during peacetime.
39. Veteran Administration (VA)
VA loans are mortgage loans which are
guaranteed by the US Department of
Veterans Affairs.
VA does not make loans, it only insures
loans made by approved lenders.
40. Veteran Administration (VA)
VA Home loans are available for eligible active
duty veterans and surviving spouses.
VA Home loans are available for Reserve and
National Guard Personnel with at least six
years of honorable service.
41. Veteran Administration (VA)
No Down Payment is required
No Monthly PMI
VA Funding Fee: 0 to 3.3%
(Veterans with service connected disability of 10% or
more are exempt
from paying Funding Fee)
Seller is permitted to pay all of the veterans closing
costs up to 6% of the sale price of the home.
42. Assumable
All VA loans are assumable, meaning the seller can
transfer their loan to the new owner when they sell
their house.
The new owner can take over the VA loan (and rate)
without the additional cost of obtaining a new loan.
To assume the loan, the buyer has to meet the credit
standards for the loan.
This feature can make it easier to sell a home with VA
financing.
43. Veteran Administration (VA)
All Condo Types Require VA Project Approval.
Condo Projects do not expire.
https://vip.vba.va.gov/portal/VBAH/VBAHome/condop
udsearch
46. Guaranteed Rural Housing Loans
(Section 502 Program)
The Guaranteed Rural Housing Loan
program is administered through
USDA Rural Development. Loans are
insured by the US Department of
Agriculture.
47. Guaranteed Rural Housing Loans
Eligibility
Borrowers must be credit worthy and
not have sufficient assets to obtain a
conventional uninsured mortgage loan.
48. Guaranteed Rural Housing Loans
Eligibility
Borrowers household income cannot
exceed the maximum allowable income
limits for the area as determined by
Rural Development
49. Guaranteed Rural Housing Loans
Eligibility
Properties must be in rural areas with
populations of 10,000 or less and under certain
conditions – Towns and Cities with between
10,000 and 25,000 residents.
Properties must meet FHA appraisal guidelines.
50. Guaranteed Rural Housing Loans
Features
Owner Occupied 100% Financing (No maximum
loan limit/Income limits apply)
Mortgage Insurance: 2.00% upfront/0.5% annual
Project must be in a USDA Eligible Area
Project Approval – Reciprocity with FNMA, FHA, VA
51. Assumable
All USDA loans are assumable, meaning the seller can
transfer their loan to the new owner when they sell
their house.
The new owner can take over the USDA loan (and rate)
without the additional cost of obtaining a new loan.
To assume the loan, the buyer has to meet the credit
standards for the loan.
This feature can make it easier to sell a home with
USDA financing.
53. Non-Warrantable:
Any loan that is ineligible for Fannie mae or Freddie mac
financing
Jumbo loans (over $417,000)
Condotels
Foreign National Loans
Asset Based Loans - Asset Depletion and Asset Pledging (not
available in DC, VA or WV)
55. Project Eligibility Waiver (PEW)
FNMA – Project Eligibility Waiver – Loan specific,
$200 Fee charged by FNMA regardless of the
outcome. PEW’s are commonly used for:
1. Commercial space over 25%
2. Single Entity ownership greater than 10%
3. HOA delinquency greater than 15%
4. Budget reserve line item of less than 10%
5. Pending Litigation
56. Condotels
1. Projects with registration services that offer rentals
of units on a daily basis
2. Projects that restrict the owner’s ability to occupy
the unit
3. Projects with mandatory rental pooling agreements
that require the unit owner to either rent their units
or to give a management firm control over the
occupancy over the units
4. Red Flags: Central telephone system, central key
system, room service, daily cleaning service, etc.
58. Foreign National Loans
No SSN, ITIN, green card or visa required. Valid Passport is
required.
NO FICO Score is require. However, international credit report or
alternative credit (4 trade lines) is required
Down payment of 50% (can be as low as 35% on a case-by
basis)
Evidence of Income from country of origin
Investments loans on a case-by –case basis.
All documents need to be translated into English
59. Asset Depletion
This program allows borrowers to use liquid assets to
qualify for a loan. Assets are annuitized at a rate of 5% to
age 85 or 30 years, whichever is less.
Eligible assets include:
1. Cash equivalents – CD’s, Money Market, Savings
and checking accounts.
2.Trust funds and investment portfolios – stocks,
bonds, mutual funds, etc.
3.Retirement accounts if the borrower is of
retirement age.
60. Pledged Assets
This program allows the borrowers to finance up to 90% of
the property value by pledging assets.
Borrower is able to defer capital gains tax by retaining the
investment strategy while receiving benefit from interest,
dividends, and investment growth.
1.Any person may pledge assets on behalf of borrower
2. Pledged accounts may be considered for release
after 36 months.
3. Not available in DC, VA or WV
61. Pledged Assets
Amount of Assets to Pledge:
Non-Volatile Assets (1:1) - savings, CD’s,
money market accounts
Volatile Assets (2:1) – Stocks, bonds, mutual
funds, etc.
