The condo questionnaire: why your lender wants it and what can go wrong
If you're financing a condo, your lender will usually send the association a questionnaire about the whole building, not just your unit. The answers can affect whether, and on what terms, you get the loan.
What it is
A condo questionnaire is a form the lender asks the association or its management company to fill out. Lenders use it to decide whether the project meets their guidelines, and loans often have to meet the standards of the agencies or investors that buy or insure them. A project that meets them is often called "warrantable".
What it typically asks
- How many units are owner-occupied, rented or owned by one person or company.
- How many owners are behind on dues.
- Whether the association is in any lawsuits.
- Whether there's commercial space in the building, and how much.
- The association's insurance coverage.
- The budget, including how much goes to reserves.
- Whether the developer still controls the association, and whether construction is finished.
What can cause trouble
Pending litigation, a high share of owners behind on dues, lots of rentals or one owner holding many units, thin reserves, or inadequate insurance can each make a project harder to finance. The result can be a delay, a different loan program, a larger down payment or a denied loan, which is why it helps to know early.
How to get ahead of it
- Ask your lender at the start whether they've financed in this building before.
- Read the HOA documents as soon as you have them: the minutes for lawsuits, the financials for delinquencies and reserves, and the rental rules.
- Ask the manager how long the questionnaire takes and what it costs, since some associations charge for it.
- See the building rules lenders check, with the numbers.
This guide is general information. Lending guidelines change and differ by lender and loan type; your loan officer can tell you exactly what applies to your loan.