The type of property you own is a very important factor in determining your rates and can affect you loan process. There are many types of properties, but the Single Family Residence, the Condominium, and the Planed Urban Development are the most common.
SINGLE FAMILY RESIDENCE (SFR)
A Single Family Residence is a type of property in which the structure stands on its own lot. Typically a SFR is designed to house a single family and includes a front and back yard. A single-family home may provide you with the most privacy along with flexibility to change or sell the property as you wish. You are directly responsible for maintenance and all associated property taxes.
PLANED URBAN DEVELOPMENT (PUD)
A Planed Urban Development is a classification in which the unit is planed and built in a special zone within a municipality. In a planned unit development, or PUD, you typically own the house that you live in as well as the surrounding lot, but you also own part of a common area that is shared with other residents and maintained through a homeowner’s association fee. Fees paid to a homeowner’s association are generally not tax deductible.
A PUD may include any mix of condominiums, SRFs, and retail locations. A PUD may be attached or detached. An attached PUD is one in which one property is physically attached to another property much like a condominium, while a detached PUD is one where the unit sits on its own lot of land within the PUD.
With a condo, you own all of the space within the four walls of your living area, but you don’t own the surrounding building or land. In general, you must abide by the rules of the homeowner’s association. However, you get the benefit of professional property management and aren’t directly responsible for the maintenance and upkeep of the external property.
You’ll typically pay a monthly or annual fee to the homeowner’s association.
Your unit is assessed individually for property tax purposes and you are directly responsible for their payment.
Fees paid to your association are not tax deductible, but any property taxes paid on your unit are
Two new mortgage fees implemented by Fannie Mae affecting condo buyers. Buyers without a minimum 25% down payment have to pay an additional 0.75% of loan amount at the closing or higher interest rate of about 0.25% and a 1.75% additional fee or 0.75% higher rate for investment, regardless of their credit score.
Overview of Fannie Mae Condo Guideline Changes:
For new construction and newly converted condo developments, 70% of the units must be pre-sold (closed or under contract).
At least 51% of the total units in the project must be conveyed to purchasers as principal residences or second homes. – Investment Property and Primary Residence less than 10% Down Payment.
No more than 15% of condo project units can be more than 30 days delinquent on HOA dues.
No more than 10% of a project can be owned by a single entity.
No more than 20% of a project can consist of non-residential space.
A requirement that borrowers must now obtain a condo-owners insurance policy unless the master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condo-owners policy, known as an HO-6 policy, covers personal property, personal liability, and the physical unit from the studs and in.
Fidelity insurance will be required for condos with 20 or more units, ensuring that homeowner association funds are protected.
The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.