When searching in earnest for a Chicago condo or suburban Chicago condo, an important early step is to discuss your financial situation with a lender and get pre-approved. Unless you have cash to pay, you’ll have to finance a portion of the condo purchase, and you’ll need a bank or other lender to provide this. Don’t worry. The vast majority of condos, town homes, single family homes and other real estate purchases have been financed this way for generations.

As part of the process to see if you are eligible to finance a condo, the lender will ask questions about your income, debt, savings and other topics. This will hopefully lead to a pre-approval, which is a commitment by the lender to extend a loan to you up to a certain dollar amount. Why do you need this pre-approval? Because when you are shopping for a Chicago condo or suburban Chicago condo, the pre-approval shows condo sellers that you are actually able to buy a condo.

At Aura-condos.com, we like to say that having a pre-approval helps open doors for you when shopping for real estate. It demonstrates that you are serious.

When you finance a condo, you enter into a loan agreement with the lender. You then have a mortgage, which you pay in installments each month. How much you pay each month depends on a combination of many things, including:

  • The price of the condo
  • How much money you can put down to begin
  • The lending interest rate at the time
  • Taxes
  • Private Mortgage Insurance (PMI), if applicable

As you’d expect from Aura-condos.com, the best place to buy and sell condos, we have resources to help you finance a condo. These resources are our preferred lenders (left).

Thanks to our many years in business, as well as the thousands and thousands of buyers and sellers we have served over that time, Aura-condos.com’s preferred lenders know your needs and they know the requirements of condo lending. We’ve partnered with these lenders because of what the programs they offer to our customers, their service and their responsiveness.

You are certainly more than welcome to explore other lenders of your choice to finance a condo, but feel free to call upon our preferred lenders for great rates and programs to match nearly any individual situation. They are available directly or via our condo specialist Realtors®.

The report states that six Fannie Mae employees based in Florida will conduct an examination of condominium projects across the state that may not currently meet the standard eligibility. This could be due to insufficient occupancy status, owners not being current on homeownership association (HOA) dues, the unit’s lack of financial stability and overall poor condition of the property.

With the ‘Special Approval’ designation, exceptions may be granted on a case-by-case basis by the six-member team where the property does not meet certain criteria, but is deemed sufficiently stable in other areas.

For example, if a property shows higher rates of delinquencies in owners paying their homeowners association (the current maximum is 15% behind on HOA dues), but the unit is overcapitalized in its reserve fund for essential repairs (the current minimum is 10%), then an exception may be made.

Florida is ground zero for the housing collapse when it comes to condos and rebuilding the market is proving to be a challenge. Investors are no longer hugely active in Florida condominiums, a source tells Aura-condos.com, and owner occupiers will often not qualify for an Federal Housing Administration (FHA) loan.

“Mortgage insurers are also out of the market,” the source said, “this should give borrowers the option to pursue a more conventional loan, an alternative to FHA.”

While Fannie does not originate loans, the firm remains confident that this move will help provide a liquidity backstop for lenders in the state. However, questions remain as to the effect this move will have as FHA guidelines for originating condo mortgages continues to tighten: the spot approval process, for instance, will be eliminated for all case numbers on or after Feb. 1, 2010.

The FHA guidelines intend to hedge risks for investors, by limiting their geographic exposure, despite the fact that a huge uptick in third-party money is seen as a necessary addition to the mortgage finance market (see Aura-condos.com February Beyond Binary column for a full report).

The FHA guidelines state an investor may own no more than 10% in a single set of units. For two and three unit projects, no single investor may own more than one unit. Further, no more than 15% of the total units can be more than 30 days past due on their condominium association fee payment. At least 50% of the units must be sold before any mortgage on a unit can be endorsed. In some cases, FHA will temporarily reduce the pre-sale requirement to 30%.

In light of this, Fannie’s move is widely supported by the National Association of Realtors as well as those who have boots on the ground in Florida: “Our state is probably the hardest hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track,” said Moe Veissi, a vice president at NAR and broker-owner of Veissi & Associates in Miami.