I received a call this week from a past client who was selling his condo, complaining that the buyer got turned down for a loan with Wells Fargo.
The bank told the buyer it was because the condominium community, here in Torrance, had 50% of the units occupied by tenants.
I quickly explained that while some loan programs require that at least 70% of the units be occupied by owners, that this is not universally true. Some banks just don’t like condos, and so set the bar high on the requirements.
As a buyer, you would want to think about that too. If a big repair or another big event comes up, the owners who don’t live there might look at the expense differently than the owners who live in their unit.
From a banking point of view, they want to see that the community is well kept, and that the quality of life is good.
Sometimes when you have too many renters, there is more wear and tear on the complex and the unit itself, which is the bank’s collateral.
However, we have banks and loan programs that do not look at occupancy ratios, so I was able to get this buyer their loan.
Condos are a higher risk investment than single family homes. You’ll notice that the interest rate on a 10% down house loan is lower than the 10% down on a condo loan, even if the condo buyer has perfect credit, low debt ratio and lots of money in retirement funds. Be aware that not all lenders are created equal.
If you or someone you know is interested in buying a condo, have them call me first at 310-218-6855.
I offer a FREE no-obligation, 90-minute consultation.