Even with homes today being so affordable many people are still turning to condos as a means of going from renter to owner. They have great affordability and many offer amenities that many homes don't have which include exercise rooms and pools. But, buyers should be cautious when considering condos because more and more lenders have become very strict when it comes to lending for a condo.
Amazingly, many financial institutions have issues with condos because of high speculator ownership and dropping prices and in turn they are now even excluding certain complexes.
In a recent report, various banks and the government-backed Fannie Mae are starting to refuse to lend to potential buyers who want to purchase condos in certain complexes.
With foreclosures on the rise and people not getting the financing they need in order to buy a condo some complexes are becoming increasingly empty.
Furthermore, as some of these complexes slowly empty and homeowner fees not being paid from a lack of residents the property begins to suffer with common areas not getting the attention they need. Therefore, as with any property, the curb appeal is affected and people stop looking to buy in that complex. The effect of this decline then puts the condo complex in a downward spiral.
The good news is that buying a condo can still a good idea as long as potential buyers understand that there are lending restrictions for some complexes.
Some financial situations are looking at the overall situation of some complexes before they determine if they will lend money for condos that have gone into foreclosure. They will be looking into how many of the condos are owned by speculators, and to see if the residents are keeping up on their H.O.A. dues.
Today, there are even more challenges in purchasing condos and sometimes even a basic entry-level purchase may be even more difficult for buyers as some lenders require bigger down payments while at the same time there may be higher fees associated with the loans.
Government backed Fannie Mae will only grant mortgages on a condo as long as 70 percent of the units in the complex are presold which used to be only 50 percent.
One of the main reasons for these tougher lending practices, particularly with newly built condos, is due to the high level of foreclosed condos. They push the prices for the condos down even further and weaken the condo association budget for the complex. Lenders now see condos as a riskier investment and are very cautious when a borrower wants to buy one.
When it comes to considering a condo, it pays to do your research because after all, knowledge is power and knowing the situation before you jump in will save everyone heartache.