Condo associations come in many forms, not all are accepted by all lenders. This June, Fannie Mae has relaxed its rules for condos loans.
New Fannie Mae Condo Mortgages for Purchases and Refinances
The two main changes to the rules have to do with how many units can be rented out and how much of the project can be commercial space.
Below is a table that shows how many units could have been owned by investors and how many can be owned by investors now to get a mortgage loan approved by Fannie Mae.
21 or more Units
The increase in the number of allowed investor-owned units is not the only change, though. Fannie Mae will not apply the limits to all investor-owned units.
Exempt units are:
Units controlled of owned by non-profit companies used to provide affordable housing
Units held in affordable housing programs (including units subject to non-eviction rent regulation codes)
Units owned by higher-education institutions for a workforce housing program.
Also exempt are purchases that reduce the number of units a single entity owns if:
1. that single entity owns no more than 49% of the units;
2. there is evidence that the single entity is marketing units for sale in order to reduce its ownership percentage in the project to 20% or less;
3. the single entity does not owe back HOA fees, and
4. the association collects only regular association fees and has no plans to change that. (So, no relief for associations that have or plan to have special assessments.)
Allowed Commercial Space
Allowed commercial space is increased from 25% to 35% of the project
Commercially owned and operating parking space is now not included in calculations.
Fannie Mae’s other restrictions continue to be in force and none of the above changes anything about FHA condo loans. Or VA.