How Much Down Payment Do I Need To Buy A Condo in California?
Posted October 14th, 2009 in Mortgage Loan InsightsIf you are purchasing a condominium using a conventional Fannie Mae / Freddie Mac loan (not FHA), you need to know that the minimum down payment you'll need to bring in is 15% of the sale price. That's because mortgage insurance companies will no longer underwrite insurance on loans for condos that carrying balances in excess of 85% of the purchase price or value, and there are rumors that number will be further reduced to 80% LTV in 2010, due in part to mounting condo foreclosures across the country (means 20% down will soon the the norm for condos).
What about FHA? Can I still use a FHA loan to buy a condo?
If you don't have 15% to put down for a traditional loan, a FHA-insured loan is a viable alternative, but ONLY if the condo complex has received HUD approval AFTER November of 2007. Condo complexes with HUD approvals older than November of 2007 will render the complex ineligible for FHA financing. Realtors and mortgage companies across the country are scrambling to receive FHA case numbers before the November 2nd cutoff date for condos not certified within the last 2 years, with many lenders issuing cutoffs within the next few days for new case numbers.
If the condo complex has NOT received HUD approval within the last 2 years, it is not possible to secure a FHA loan on any unit therein until either the Homeowner Association reapplies and recertifies the complex with HUD, OR a major bank assumes the entire liability of the complex, which isn't likely to happen much or often.
Bottom line? If you're in the market to purchase or refinance a condominium in California, you'll need 15% or more down payment or equity in the property to qualify for a conventional loan, OR the condo complex must have received HUD approval prior to November of 2007 to qualify for FHA condo financing.
Call me with any questions you may have.
