Chicago Condo Loans: 6 Common Issues

Chicago Condo Mortgages
Chicago Condo Mortgages

Chicago condo loans come in quite a variety of projects. Some do not meet conventional condo mortgage requirements. And other programs have issues with condos, in general, like the FHA. The FHA wants condos to belong to project it’s approved. And there are few projects that are approved. For that reason, it is best to fall in love with a condo that’s in a project that meets the conventional condo mortgage requirements.

There are many condo mortgage requirements. A a handful of them give rise to most of the problems people looking to finance a condo have.

If you’d like to talk to a Chicago mortgage specialist about your upcoming condo financing needs, call me at 847-840-8884.

The Most Often Broken Chicago Conventional Condo Mortgage Requirements

Chicago Condo Mortgage Loans
Chicago Condo Mortgage Loans

1 Some Chicago condo associations own and/or operate businesses. The powers that be do not like that. They like all of a condo associations’ income to come from fees that are directly related to running an association..

2 Some Chicago condo associations (or their sponsor or developer) are involved in current or pending law suits. That is not, in itself, a problem. It becomes a problem if the project’s safety, structural soundness or habitability or functionality are the cause of the suit or if the amounts involved are large. Large is more than 10% of the association’s income for 1 year. If a title company will insure over the law suit, the law suit does not matter to a lender any more.

3 Some Chicago condo associations want to recoup more than 6 month’s worth of unpaid association fees. Fannie Mae and Freddie Mac do not like that, they want everything over 7 months to go to them.

4 In some Chicago condo projects one entity owns more than

  • 2 units in projects with 20 units
  • or fewer than 20% of the units in projects with 21 or more units

and that makes any and every unit in them non-warrantable.

5 Some Chicago condos are not mainly be residential in nature. “Rresidential in nature” is defined as less than 35%of the project is taken up by non-residential space.

6 Last but the most common on has to do with the budget. Some Chicago Condo association budgets do not call for at least 10% of the revenue to go to the reserves fund. That is not always a sign of bad management (sometimes an association’s reserve are so large, there’s no need for adding more). A lender wants proof of that. In this case, proof comes in the form of a reserve study. If one doesn’t exist, you can order it, but it takes time to get one done.

Chicago Condo Loans Takeaway

Interested in getting a condo mortgage in Chicago? Before you fall in love with a unit, take a look at the bylaws and the budget if you’re after a conventional loan. If you’re looking for an FHA loan in Chicago, make sure the project is approved. Or work with a lender who’s willing to get your unit spot-approved. (That requires time, though.)

If you’d like to talk to a Chicago mortgage specialist about your upcoming condo financing needs, call me at 847-840-8884.


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