How borrowers buy condos under construction

Lenders' documentation requirements cover the whole building, not an individual unit

TRD MIAMI /
Dec.December 06, 2015 03:00 PM

Lenders typically will lock the interest rate for a new condo-purchase loan for 60 days.

Not everyone can pay cash for a new condo while it’s under construction, but financing is available, often in the form of a jumbo mortgage loan.

Peter Grabel, managing director of Stamford, Connecticut-based Luxury Mortgage, told the Wall Street Journal many lenders will finance new condo units in buildings under development but won’t close the loan until the construction work is done.

In rapidly expanding markets for new condos, many buyers need a jumbo mortgage loan to finance purchases. Jumbos exceed conforming-loan limits of $417,000 in most locations and $625,500 in New York and other pricey places.

Jason Will, national condominium manage for Wells Fargo Home Mortgage, told the Journal that qualifying for a loan to buy a condo under construction is similar to financing any home purchase. Lenders review the applicant’s assets, credit score and income.

But Will said lenders will require documentation for the entire condo building, not just the unit the loan applicant plans to buy. Examples of required documents include a master insurance policy for the entire condominium property, a contract between the developer and the homeowners association, and a certificate of occupancy that verifies compliance with building codes.

According to real estate attorney Michael J. Romer, a partner of Manhattan-based Romer Debbas LLP, lenders usually refuse to close a mortgage loan to buy a condo if fewer than half of the units in a condo building are occupied by owners.

Developers often establish a partnership with a “preferred lender,” which can make it easier for them meet owner-occupancy requirements. But preferred lenders have limited appetites for risk and usually finance no more than 20 percent to 30 percent of the units in a condo development.

Lenders typically will lock the interest rate for a condo-purchase loan for 60 days. But others including Wells Fargo will lock the rate for up to two years prior to closing, Will said. [Wall Street Journal] — Mike Seemuth


Related Article

arrow_forward_ios
Bal Harbour Shops, Matthew Whitman Lazenby, Erica English, Howard Friedberg and Michael Katz

Whitman scores $550M loan for Bal Harbour Shops

This is how many new condos are left to sell in Miami

Mortgage interest rates dropped last week and may stay down for months

Brexit bonus? More first-time buyers enter the UK housing market

Two condos sell at Apogee, including ex-foreclosure king David Stern’s unit for $15M

Picasso’s grandson buys condo in
Miami Beach’s South-of-Fifth

Pet e-commerce millionaire buys Murano at Portofino condo

Could tax reform kill the jumbo mortgage market?

arrow_forward_ios