Owner Occupancy, Condos and Financing how they relate and what it means if you want to buy a condo?

Do you know what Owner Oc Rate (O.O.R.)  is? The ratio of owners living in a community compared to rented units. EX: 100 units in a condo 65 of them are rented out leaving a 35% owner occupancy rate. 
What does this mean for buying a condo. Well if you are looking to obtain FHA financing you need at least 51% O.O.R. and the HOA to be in good standing plus have FHA approval. You can find if a condo is FHA approved at THIS SITE.
What if the condo is below that 51%? Then no FHA financing and you must do a conventional loan. 
Most conventional loans start at 5% down. So no problem right? Wrong. A new regulation that specifically involves mortgage company insurers setting new standards. Which you must have mortgage insurance if the loan is more then 80% of the total loan. 
Most mortgage insurance companies are requiring a 70% O.O.R. To which they will insure the loan IF 10% is being put down. 
What does this mean for buyers? This means that getting into a condo is that much more difficult. Many investors swoop up condos as it is low maintenance rentals. Which highly affects the O.O.R. 
When looking into purchasing a condo make sure you or your agent does due diligence to see if it is FHA approved, what the O.O.R. is and if you may be able to come up with the 10% down if the rate is at least 70%. 
This can save a lot of heart ache, time and pester when looking at purchasing these properties. 
If it is classifies legally at a town home this rule does not apply so make sure to check what the unit is legally described as. 
Happy Hunting! 
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September 25 2012 - Denver
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Good post Sarah!
This is making it pretty difficult for first time buyers to get into new homes (condos).
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September 25 2012
Hi Sarah, great posting!  Many thanks for taking the time.  Its a mad world out there in real estate!
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September 26 2012
 
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  • Posted by Claudia Gerardino (Yo hablo su idioma)
  • In Buying Process
  • April 01 2012
Mortgage Rates
 
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