I'm a millennial myself; and like most millennials, I'm realizing that each month, I'm throwing my money away as I continue to rent my high-rise downtown condo. However, I don't want to buy a single family home and be responsible for the personal maintenance and upkeep. I want to continue to live in a condo, but everywhere I look, everything seems to be overpriced or I find a condo in my price range, only to find out that I can't qualify for a loan without putting down way more of a down payment than I can afford.
When you're buying a condo, and you're going to use financing, the qualification process is three-fold. First the buyer has to be approved by the lender. Then, the condo itself has to be approved by the lender. Finally, the buyer has to be approved by the condo's HOA.
Many times the buyer may qualify with the lender, but the condo is unwarrantable, and therefore won't be approved for financing by the lender. The buyer and the condo could be approved by the lender and then the HOA doesn't approve the buyer. This process can take over a month only to find out that you can't buy the condo which can be very, very frustrating.
THERE IS HOPE
Maybe you're like me, and you see all types of programs for first-time homebuyers offering 3.5% down for single family homes and are feeling left out because what you want is a condo and they are asking for 25% down. Well, there is a way for you and I to get what we want.
Now I have to warn you, it's not going to be as easy at 3.5% down, and there is a process and some homework you will need to do, but if you have good credit (690+) and have been saving (you'll need 10%), there is hope for people like you and I.
The first thing you will need to do is find out from the building that you are looking interested in has 10% of its budget in reserves. There are other pieces to this puzzle that you will want your realtor to research, but if the condo's association doesn't have the reserves you're wasting your time even looking at the unit.
HOW IT WORKS
If the condo can pass the limited review, then there is financing available for those who have a credit score of over 690 and can make a down payment of 10%. So lets say you're looking at a $250,000 condo, and you are able to find one that will pass the limited review; you can go with $25,000 instead of the typical $62,500 (25%). And I don't know about you, but the idea of saving $25,000 sounds a lot more feasible than $62,500.
Once you have your 10%, your lender can help you qualify for a 2-step 30-year fixed loan. Essentially, you'll get 2 loans. The first loan will cover 75% (the maximum Fannie Mae will guarantee for a condo) and then a second loan for 15%. In addition, you'll also be able to write off the interest on the second loan. 75%+15%=90% leaving only your 10% needed to close the deal.
Now you might say, "10% is still a lot, I only have 3.5-5%." Then sadly, short of a housing miracle, you're going to be renting a bit longer or you're going to have to get a single family home or a townhouse.
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