All Banks Qualify HOA Loans Differently
While some lenders specialize in condominium and homeowner association financing, a few do it as a courtesy to existing relationships and others simply say no. All lenders are not the same.
Each financial institution can require particular types of information, charge specific interest rates, and provide custom loan structures. Finding the perfect fit can be challenging. If you sit on an HOA board, you may want to familiarize yourself with some basic HOA loan terms.
Most lenders want to see a professional and complete borrowing application or loan package. This document should include financial information on the condominium or HOA as well as the purpose of the loan and how it is going to be repaid. Lenders look at several things when making a condominium or HOA loan decision.
First, banks qualify diversity of ownership when evaluating you for an HOA loan
They consider the diversity of ownership. Lenders prefer condominiums and HOAs where there is not a single owner with a concentration of units. They also prefer units to be mostly owner-occupied versus rentals.
Second, to qualify you for an HOA Loan, banks want to know about dues
They will want to know about delinquency rates of dues. Many want to see delinquencies under 10%.
Third, banks look at the value of your home owners association
Lenders look at the size of the loan relative to the value of the properties within the condominium or HOA. Ideally, the proposed loan is less than 10% of the total value of the total units within the condominium or HOA. Finally, lenders want to be sure that plans to repay the loan do not put an unreasonable burden on HOA members. Dues should not increase by more than 30%.
Arch Capital Solutions acts as an advocate for your HOA. We have relationships with lenders who specialize in HOA loans.