When the American real estate market went through a bonanza in the early part of the century, condominium buyers faced more difficulties in terms of financing compared to those who were purchasing single-family homes, which mortgage lenders considered “low-hanging fruit.” Tight underwriting guidelines and high closing costs were common prior to 2008. After the housing market crashed, lending standards were revised to make them more uniform and equitable. Nonetheless, condo buyers can still run into certain financing issues.
Now that the downtown San Diego condominium market is one of the most attractive in the United States, the last thing you want is to run into financing issues prior to sitting down at the closing table. When this happens, you need to know how these problems can be solved.
Building Eligibility for Certified Mortgages
In today’s mortgage market, downtown San Diego condos may be eligible for three types of home loans certified by government-sponsored entities such as Freddie Mac, Fannie Mae, and the Federal Housing Administration. The guidelines are usually related to the bylaws and management record of the homeowners association. If the building does not qualify for conventional or FHA loans, your mortgage broker or real estate agent may still be able to find a lender that will provide financing, but this could come with a higher down payment and more expensive closing costs. You may be able to refinance into a conventional loan down the line if the building becomes eligible.
HOA Litigation History
As a condo buyer, don’t be discouraged to learn that a lender will not grant a mortgage on a condominium tower deemed to be too risky due to a history of prior and pending lawsuits involving the homeowners association. Instead of trying to find another lender, you may want to look for other listings.
Insufficient Down Payment
This issue is not uncommon in the downtown San Diego condo market due to high demand and high property values. Not all homebuyers will be able to come up with a 20 percent down payment on the penthouse unit of a boutique condo tower in the Marina district. In this case, applying for FHA financing is a solution that may allow a down payment as low as 3.5 percent, and some of the funds can come from gifts made by relatives.
Even though low appraisals are not common in established markets such as downtown San Diego, there is always a chance of this happening and holding up the loan approval. Appraisals can always be disputed, but success may be hard to come by when a bank is processing the loan application internally. Mortgage brokers have a greater chance of winning an appraisal dispute, and they can also push for a second appraisal as long as the seller knows getting to the closing table will take longer.
Whatever type of real estate in downtown San Diego you’re looking for, whether it’s condos, lofts, or penthouses, make sure to connect with a reliable agent who knows the downtown districts. Reach out to 92101 Urban Living today at 619-649-0368 today to begin your search.