"A big Bank in America declined my loan application because the condominium complex owner-occupancy density was too low. I have great credit, five times the payment in monthly income, and I"ve saved my own money up. How can I get a mortgage to buy this condominium?"
Let's start by explaining why the big banks in America are declining these loan applications. While you are an excellent borrower, the collateral, in this case, the property, is part of a common-interest development (that's lender-speak for condominiums, co-operatives, and planned unit developments). What that means is that the property you are purchasing is subject to a layer of "opt-in governance" and the composition of the "opt-in entity" could have material effects on the value of the properties in that "opt-in entity".
That was a lot of fancy speak for this statement; a high percentage of renters is less desirable because the owners of the property (investors) have less "emotional interest" than owners who would make the property his/her home.
Stated differently, an investor-owner is less likely to pay his/her HOA dues, if he/her ran into financial difficulty, than an owner who makes the property his/her home. It's a risk factor.
Does that mean its a dead-deal?
Absolutely not. We can make loans on those condominiums if the purchaser puts 25% down payment and plans to make the property his/her home.
If the property is approved by the Veterans Administration, and the buyer has eligibility for a VA home loan, the owner-occupancy issue is a moot point; the VA doesn't consider owner-occupancy to be a risk factor.
If the buyer wants to pursue an FHA loan, and the complex needs FHA approval, the owner-occupancy density must be 51%.
Owner-occupany is not the only reason a property in a common-interest development might be declined for high, loan-to-value mortgages. HOA financial stability, pending litigation, reserve and repair plans, and general maintanance all come into play. I'll discuss those, in more detail, on this site, later.
