HOA/Condo Delinquencies, How They May Prevent You From Buying A Home

As you hear about lending restrictions changing for credit scores, debt to income ratios, down payment requirements, and a whole laundry list of other requirements to qualify and obtain a loan for buying real estate, there are 2 items that you have no control over:

Homeowners Association or Condo Association Delinquencies

A delinquent homeowner is an owner of a unit or townhome or home who hasn’t paid their monthly association dues. Back due association fees create a deficit for the association which uses money to pay staff, maintain the property and/or commons areas, in addition to upgrades, additions, and other improvements to the property.

If 30% or more of the association is delinquent, a lender will NOT approve your loan for that particular property.

Means to collecting delinquent dues can be filing leans against the homeowner, taking them to court, etc. It’s up the association to try to collect the missing payments. If that is done effectively and money is collected in order to bring that percentage below 30%, you should still be able to get approval for your loan.

This information will not be available (usually) until your lender orders a Condo/HOA Questionnaire, which usually takes a few weeks to get back. You can usually tell from sales history if a project will have that problem or not.

If you’re using cash to buy a condo, this will have zero impact on your purchase.

Investor Ratio

Lending guidelines require at least 51% of the property to be owner occupied. A high investor ratio will also kill your loan before you have time to pack!

This information will also be on the same questionnaire your lender requests. We can generally get some idea of the investor ratio based on the tax records, but they’re not 100% accurate so the best numbers will come from the management company.