HOA's and Mortgage Financing
What Park City Condo HOA's need to know about Mortgage Financing:
As we all know, it has become more difficult to qualify for a mortgage during the economic downturn. All Underwriting guidelines have become more restrictive, but what is hitting the Park City real estate market especially hard is the increased limitation on condominium financing. Most condo projects in our town allow for nightly rentals. Recently, this has become a deal-killer in mortgage lending. In some cases, having just one website advertising a unit for short-term rental will disqualify the whole condo development for financing. These rentals can push the project into classifications that lenders feel are too risky to loan on.
Property management companies also need to be aware that if they post a project by name or address, this can also greatly reduce financing options. Recently, a large, well-established condo project in Park City allowed a time-share company to buy five units. When underwriters discovered this by doing a simple "Google" search, the entire project was classified as a timeshare venture. This forced buyers to apply for financing with very undesirable interest rates and terms. Another case of financing disaster took place when the HOA of a large local development intermingled its dues with the revenues derived from retail activities in the common areas. This project is now classified as a condo-hotel and is nearly impossible to get financing for.
HOA's and property management companies should invite a mortgage lender they trust to speak to them about the new rules so they can make informed decisions about changes to the CC&R's and marketing plans. It will be the difference between owners being able to sell their units to the general public or having to hope the elusive "cash-buyer" comes to their rescue.
Annette Velarde has been a resident of Park City since 2002. She has been a mortgage lender with Wells Fargo for 8 years.
