Financial Fact: Time-shares, fractional, condotels and condos
March 2, 2013
In the mortgage lending business a large majority of all the mortgages I do and a majority of all the mortgages being approved nationwide are Fannie Mae, Freddie Mac, FHA or VA mortgages.
These four agencies have lending guidelines that must be met for them to approve and fund a new mortgage. These rules include items such as the minimum credit scores allowed, the maximum loan to value, types of property they will lend on and many other factors that can make or break a deal.
Probably one of the most misunderstood item in all of these agencies book of rules concerns certain types of properties. And here in the High Country we have all of these often misunderstood types of properties.
The first type that is difficult to finance is a unit in a condotel complex. Simply put, a condotel is a complex where the facility has a check in desk, centralized phone systems and other types of amenities that you would find in a hotel or motel. One sure way to determine if the complex is a condotel is walk into the lobby and if you can go to the desk and rent a unit for the night, it is a condotel.
Another type of unit that is sold here in the High Country that causes financing concerns is one where the complex has time-share units. For a reason that is unknown to me, the four agencies I listed earlier will not fund a loan in a complex where there are time-share units.
And the last somewhat-unique type of property that we are seeing more and more of are the fractional ownership properties. These are dwellings that you can purchase a fraction of the ownership. You receive a deed on the property up to a set percentage of the property. As an example, you can purchase a 25 percent share of a $1,000,000 home for $250,000. And you have access to it three months a year. These too are not permissible for the four funding agencies listed above.
Now all of this does not mean that financing is not available. The loans that are out in the open market are known as hard money loans. Banks such as the one I work at offers financing for all of the above. The four agencies listed above have chosen their rules and we have chosen ours.
So just because one lender’s rules exclude that type of property does not rule out that another may finance the unit you are interested in purchasing.
For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at firstname.lastname@example.org. Bob is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.