Q:What is a condo questionnaire?
A:When a lender sells a mortgage secured to a condo to Fannie Mae or Freddie Mac, they need to ensure that the condo meets their condo lending guidelines. A condo questionnaire is a document completed by the homeowner’s association (HOA) or the condo management group, which helps determine if the condo meets Fannie Mae’s/Freddie Mac’s requirements.
There are a number reasons why a condo may be ineligible as determined once the condo questionnaire is completed. Some (not all) of the reasons why a condo may not be eligible are:
- The condo is operated as a motel or hotel.
- Commercial (nonresidential) space in the condo exceeds 25%.
- Projects composed of non-real estate (i.e. timeshare, houseboats, etc.)
- Projects operated as a continued care community.
- Condo project contains manufactured housing not approved by Fannie Mae.
There are a number of reasons why a condo may not be eligible, which often can be determined by the information indicated on the condo questionnaire. A mortgage loan can be denied if a condo project is ineligible based on a review of the condo questionnaire.
You would assume that condo projects would shape their operations around complying with the requirements of Fannie Mae and Freddie Mac, however, this is not always the case. That is the reason why the questionnaire is required in the first place.
Condos that do not comply with Fannie Mae or Freddie Mac’s guidelines limit the market for units to be financed. Buyers may seek out other potential condo projects that do meet the necessary guidelines. Condos can make adjustments to meet the necessary guidelines if it is in their power. However, it is not always a quick process.