In the current Denver real estate market there is much conversation about how condos are going to be impact the market in both the short and long term. With the increase development of many apartment complexes in areas such as the redevelopment of Union Station, condos have become a very hot topic. The basic debate stems from what are these two classifications of condos and how do they compete.A warrantable condo is one that is approved for FHA and Fannie Mae whereas a non warrantable condo is a condo that is not approved for FHA or Fannie Mae financing and thus leaves fewer available options for borrowers.
It is extremely important when buying a condo to consider what type of condo classification the property of interest falls into. Not only will the types of financing differ, but in typical non warrantable condos, there will be a higher interest rate as well as a higher down payment required. Lenders view condos that are non warrantable to be at a higher risk. Common reasons in the Denver market that a condo can be classified as non warrantable include:
1. Less than 50% of units in a building are owner occupancy.
2. 10% Ownership in a Development – If one entity owns more than 10% of a single development, the complex is seen as having more risk.
3. HOACap Reserve – HOAs that are in line with the regulations to be warrantable will need to show they deposit 10% of their annual income into a Capital Reserve fund.
A condo purchase can be a great addition to a real estate portfolio, whether as a first time buy or even as an investment property. Just like when buying a single family home, there are a lot of factors that come into play with a condo purchase. When it comes to the Denver market, especially downtown Denver, a warrantable or non warrantable condo classification can have an impact on future resale value of the unit. To find out if a condo is warrantable or non warrantable, the best resource for you is to speak to your agent as they can work with the HOA/management company/listing agent to help with the classification. Also, know that the warrantability of condos can change as frequently as each month, and thus a condo owner will want to keep updated with the current status of their condo.
Michael Kane is a Broker Associate at Keller Williams. He is a member of the Carr Peck & Associates team that is recognized locally and nationally as in expert in real estate. Locally he is a member of the Denver Metro Association of Realtors. Nothing brings him more joy than making his client’s dreams become a reality! For more information feel free to contact him or call 303-717-9284.
Information courtesy of msn.com and image courtesy of google.com
Author:Jason Peck Phone: 720-446-6301 Dated: July 28th 2014 Views: 898 About Jason: ...
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