My most recent transaction is a condo that looked just like a detached single family home, but it was built as a condo by the developer, and has a condo designation in the tax record.
You probably know condos need an HOA cert for the loan (that includes information such as owner occupancy ratio and HOA due delinquency ratio) and your interest rate will be 1/8 or so higher than a single family home that does not have a condo designation. What you probably didn’t know is about two weeks ago, the lending rules have changed (at least for Wells Fargo), and now each lender (think bank) has to warrant its own loan. With this change banks are doing all sorts of investigations into the well-being of the HOA and are much stricter on some requirements, such as if the reserves are low.
While this is actually a good thing for the buyer (it protects the buyer from unexpected special assessments), it can SERIOUSLY delay the progress of the loan because the progress relies upon how quickly the management companies get back to the lender. This delay is probably not an issue if you have a traditional equity sale transaction (and if you have an understanding seller), it might become a huge issue if you are buying a short sale or bank owned property, especially if the bank threatens to charge you a per diem fee for closing beyond the original contract date. Not to mention also that there is a cost associated with this new condo questionnaire, and many lender are passing it onto the buyers (in my case the lender paid for it, but they won’t be doing this forever).
You might be a solid buyer with 20% down buying an owner occupied home; you still need to be aware of this potential issue. For my buyer, unfortunately, this change started in the middle of the escrow and we had no way of preparing for it. Talk to your lender upfront so you don’t get caught off guard.
