First, a townhome has no special requirements- it is
considered a single family residence and is treated just like a regular
home.
How can you tell if a property is a townhome vs. a
condominium? One way is to look at the legal description- in most cases, a
townhome has lot/block legal and a condo will show “unit __” of “Building ___”
or on tax records it will show style as being condo . But this is not always
the case. The next step would be to have title company pull title and docs to
see how it was recorded.
If it is determined the
property is a condominium, then here are the important things you need to be
aware of:
Condominiums are considered high risk properties because the
condition and value depend as much on the neighbors as the owner. For this reason,
owner occupancy is very important. This means how many owners actually
live on site vs. those that are using the condo as an investment or
second home.
Different types of loans
have different requirements:
Conventional-
If the borrower is putting down at least 20% so there is no
mortgage insurance required, then you can usually get a conventional loan.
If the borrower is putting down less than 20% so mortgage
insurance is required, then owner occupancy must be at least 75%
FHA and VA:
The government rules state that the condo association must
be on the approved list for either FHA or VA before you may do a loan for
them. The approved lists are available online. If the property is not shown as
approved already, then it can be submitted to FHA or VA for approval. It takes
about 6 weeks to get a response and during that time, you cannot order an
appraisal or do any other property related work on the file because a case
number cannot be issued if the property is not on the approved list.
To get a property approved they require:
1. Owner
occupancy of at least 50%
2. Property
cannot be involved in any lawsuits
3. Past
dues on assessment cannot exceed 15%
4. Other
documentation based on their current guidelie4ns
