Typically, Fannie Mae and Freddie Mac require a full review of a condominium association as part of our underwriting requirements when financing within a condominium. However, in some cases they can allow a limited review on a conventional loan for a condominium. A limited review will mean that we need request less documents and verify less requirements as met, and not go into as much detail as a full review.
A limited review is allowed on a conforming loan amount (below $970,800) on a primary residence with 10%+ down, or on an investment property or secondary residence with 25%+ down.
A limited review is only allowed on an established project (never a new project). An established project is a building which is 100% complete, not subject to additional phasing or annexation, the HOA unit owners control the association, and at least 80% of the units have been conveyed from the developer to unit owners.
Here is what is different on a limited versus a full review:
- We do not have to verify the number of units which are delinquent on condo fees (This is the primary benefit!)
- We are not required to analyze the condo association budget. This means no scrutiny on the percentage of funds allocated to reserves.
- For condominium projects converted within the past three years, we are not required on a limited review to scrutinize the architect or engineer’s report
- In reviewing the condominium insurance, we are not required to verify fidelity bond coverage for projects over 20 units…nor on liability insurance are we required to verify the inclusion of the severability of interests nor separation of insureds.
- (Applicable for investment property financing only): In a full review, we have to confirm that there are more owner occupants than investors in a given condo building. But in a limited review, we don’t care about the investor ratio. This rule makes a difference only on investment property financing, because if the buyer is going to occupy the property then we don’t care about the investor ratio regardless of down payment percentage.
Limited reviews allow us to streamline the condo review process so we can approve a condo faster and easier.
Interested in learning what are the common issues that trip up condos in not getting an approval on either a limited or full review? Click here.
Questions? [email protected] or 240 479 7658
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