What are the options for buyers looking to purchase condos in a multi-use building with retail, apartments, and condos?

Discussion
1

I am a real estate broker seeking loan options for a buyer interested in condos within a multi-use development that includes retail, apartments, and owner-occupied condos. Is a conventional loan feasible for such a property, or should we consider portfolio or non-warrantable loans? Any guidance on this would be greatly appreciated!

2

For owner-occupied units, expect a minimum 25% down payment and ensure that tax documentation is robust to support the application.

3

The eligibility for financing depends on the percentage of retail and mixed-use space in the building. Fannie Mae, for instance, has specific guidelines that limit commercial space to no more than 35% of the project’s total space. Here’s a detailed checklist that might help: Fannie Mae Guide on Ineligible Projects

4

@Peyton
Thank you for the clarification and the link. If Fannie Mae approves this ratio, would most conventional lenders be likely to finance this type of property?

5

Shae said:
@Peyton
Thank you for the clarification and the link. If Fannie Mae approves this ratio, would most conventional lenders be likely to finance this type of property?

Yes, that’s correct. For further assurance, you might want to check recent condo sales in similar setups to see if they were closed with conventional financing. Some lenders also maintain a list of approved condos, which can simplify the verification process.

6

Consider non-warrantable loans or Non-QM options, which are more flexible with properties featuring a significant commercial component.

7

Zayne said:
Consider non-warrantable loans or Non-QM options, which are more flexible with properties featuring a significant commercial component.

Could you provide more details on why non-warrantable or Non-QM loans might be preferable in this case? What are the pros and cons?

8

@Shae
Non-warrantable loans are suitable for financing unique properties that don’t meet typical financing criteria, often used for properties with mixed-use elements. Non-QM loans, meanwhile, offer more flexibility than standard mortgages but come with higher rates and down payment requirements due to the increased risk to lenders.