Need a Mortgage for your Las Vegas Condo?

Las Vegas real estate buyers are attracted to condos for many reasons – price, view, amenities, and location. If you’re attracted to condo living, there’s something you should know upfront about getting a mortgage to buy a Las Vegas condo.  It can be tricky – more tricky than financing a single-family home. Lending institutions carefully assess the property you want to buy. The process is straightforward for single-family homes. Not so for condos. When you buy your condo, you’re not only buying your individual condo unit (which you can sell or lease), you’re also buying a stake in the common area of the development, which makes the financing more complex.

Plus, Fannie Mae, the largest purchaser of U.S. loans, added new condo loan requirements following the housing crash in 2008.

Be prepared ahead of time. Know what the lending institutions are looking for when you get ready to find and finance your condo. Here are some of the most important condo finance problems that we watch in our condo market:

New Developments.  So, you’ve fallen in love with a brand new condo development. You should know that Fannie Mae won’t offer financing for units in that development until 70 percent of all units have sold. The good news is that many new condo developments have alternative lenders that offer financing until most of the units are sold.

Investors. Too many investors buying into a condo development is a liability, according to Fannie Mae. Their requirements state that 51 percent of all condo units should be used as a primary or secondary home. Not every homeowner’s association keeps tally of which units are owned by investors, so it’s common for condos owned by legitimate second home buyers to be lumped in with investor units. Unfortunately, this causes the number of investor owned units to appear larger than it is, pushing the percentage allowed over the top. 
Does the condo development you’re interested in have a leasing office? If so, there may be a higher percentage of investor-owned units. That may spell bad news when trying to finance your condo.

Ten Percent Rule.  Conventional lending institutions aren’t pleased when individual owners buy more than ten percent of the units within a development. Overbuying by individual investors can cause an entire development to be un-financeable.

The buying frenzy occurred between 2006 and 2010 when the prices of condos fell sharply. Investors seized the opportunity to buy multiple units in smaller developments for historically low prices.

Financial Trouble.  While it’s true that condo owners don’t have as many direct maintenance worries as single-family homeowners, they do pay someone else to do the maintenance for them. They do this by way of homeowners’ association fees or condo fees which finance the upkeep of the common areas.

Following the housing market crash, many condo owners couldn’t afford to pay their fees. In many cases, the community reserves allocated for pool repair, landscaping, etc. simply dried up. Even though higher fees were assessed to make up the shortage, not all condo developments have restored their reserves. In some cases, these reserves were under-funded to begin with.

Fannie Mae allows only 15 percent of condo owners in one development to be delinquent in their fees. FHA lenders want at least ten percent of a condo development’s budget allocated to the community reserves.

Pending Litigation. Fannie Mae won’t finance a loan for any condo that’s involved in substantial litigation. If the homeowner’s association sues an air conditioning company for suspect workmanship while replacing the HVAC units, all conventional lending associated with that development could stop. If the lawsuit is minor, however, it won’t affect financing.

The most important thing to do when shopping for your condo is to work with an experienced real estate agent who knows the ins and outs of buying and selling condos in today’s market.

We stay on top of lending regulations. We also work hard to keep track of which condo developments are investor heavy, which ones have troubled homeowners associations, and which ones are involved in pending litigation. If you are considering a condo purchase here, we have the expertise to help you find and finance the best option for you. Contact us today.

Though not guaranteed, information and statistics in this article have been acquired from sources believed to be reliable.