How to Refinance My Condo

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A mortgage on a condo, whether a new purchase or a refinance, is more complex than a loan on a house. This is because the lender has to underwrite the building as well as you, the borrower. Lenders are especially cautious to lend on condos when property values are declining nationwide. But there are opportunities for condo owners to refinance regardless of the economic climate. Preparation is key toward having a smooth refinance transaction and knowing what kind of loan you will be able to get.

Make a realistic estimation of your condo’s value. See if any units have sold recently in your building. The more similar they are to yours, the more they will give the clearest indication of the market value of your unit. You can also use a service such as Zillow to research sales of similar condos nearby. Once you have an estimate of your condo’s value, compare it to what you owe on your mortgage. The lower the loan-to-value ratio, the more refinance options you will have.

Determine what kind of loan you have now. Some loan programs allow you to do a streamlined refinance to the same loan type. If you have a Fannie Mae loan, for example, you may qualify for a streamline refinance to a new Fannie Mae loan. If you have a Federal Housing Administration (FHA) loan, you could do an FHA streamline refinance. The streamline may not satisfy your purpose for refinancing (for example, they do not allow for cash out), but it is good to know all your options.

Talk to your homeowners association to find if there are any conditions of the building that might prevent you from refinancing. If there is an active easement or lawsuit having to do with building repairs, this could prevent you from refinancing. Other factors that could make it difficult: if more than half the units are owned by investors, or if more than 10 percent of the units have a single owner.

Apply for a mortgage. You can go through the lender that currently holds your loan or through a new lender to apply for your refinance. Having done your preliminary research, you should have a good idea whether or not your unit and your building are eligible. All that remains will be for the lender to qualify you based on your income, credit and assets.

Prepare all necessary documentation to ensure a smooth underwriting and closing process. The lender will ask for a list of documentation for your file This documentation includes income and asset verification and may include other documents depending on your specific financial situation. The underwriter will probably ask for more documents after its review. So it is helpful to have all your financial information ready to prevent delays in the loan process while you search for paperwork.

Sit back and wait for closing. Having prepared in advance, you should be able to expect a smooth refinance process and a timely closing.