Did you know that conventional loans offer surprising flexibility when it comes to condo units? Let’s dive into the specifics.
The 99% Rule: A Game Changer for Owner-Occupied Units
One of the most significant advantages of conventional loans is their leniency towards condo developments with high rental rates. If you’re planning to live in the condo you’re purchasing, you’ll be pleased to know that up to 99% of the units in the development can be rented out. That’s right—Fannie Mae and Freddie Mac, the two major players in the mortgage market, are completely okay with this scenario as long as your unit is owner-occupied.
This flexibility opens up a world of possibilities for buyers who might otherwise be deterred by high rental ratios in desirable condo developments. Whether you’re looking to live in a bustling urban area or a serene suburban community, this rule ensures that you have more options to choose from.
The Single Entity Ownership Caveat
However, it’s essential to be aware of certain caveats that come into play, particularly concerning single-entity ownership. When a single entity owns more than 25% of the units in a development with over 21 units, or more than 2 units in a development with fewer than 21 units, the situation changes. This rule is in place to prevent any one entity from having too much control over the development, which could potentially impact the stability and management of the property.
Investment Units: The 51% Requirement
The rules shift again when the subject unit is intended as an investment property. In this case, Fannie Mae and Freddie Mac require that at least 51% of the units in the development be owner-occupied. This requirement helps maintain a balance between rental and owner-occupied units, ensuring a stable and well-managed community.
Understanding the intricacies of conventional loan requirements for condos can be a game-changer in your home-buying journey. With the flexibility offered by Fannie Mae and Freddie Mac, you have more opportunities to find the perfect condo, whether you’re planning to live in it or use it as an investment. At MortgageDepot, we’re here to help you every step of the way. Contact us today to learn more about how we can assist you.
