In the current market of affordability and inventory challenges, with a shortage of single-family homes coupled with high interest rates, condominiums can be a more accessible path to homeownership. Their price point makes them a particularly attractive entry point for first-time homebuyers; in 2023, 18% of all first-time buyers bought a condo. Their smaller footprint also appeals to millennials, a demographic that’s increasingly delaying (or foregoing) marriage and families, as well as baby boomers and empty nesters looking to downsize. According to the National Association of Realtors, condos represent 11% of existing home sales overall; in some urban areas, condos and co-ops make up most of the housing stock.

Condos are indeed a critical part of the nation’s housing supply, with approximately 160,000 condo projects in the U.S. representing around 8.5 million units, and it’s expected that their popularity will continue to grow. However, while condos provide an opportunity, especially for “bookend” buyers at the beginning and end of their homeowning journey, underwriting them can pose challenges for lenders. The amount of documentation required to underwrite a condo project, for example, often exacerbates the time and cost to originate it—factors which often get passed along to the borrower. But a new efficiency-driving and cost-saving option is easing the process.

A Streamlined Review Process Simplifies Underwriting

A click of a button in Condo Project Advisor®, Freddie Mac’s tool for simplifying condo loan originations, tells lenders if a condo project has a Project Certified status. This status signifies that the project assessed by Condo Project Advisor has met certain eligibility requirements and that Sellers can confidently move forward with minimal project underwriting.

Project Certified status is a game-changer for condo origination, providing lenders with:

  • Greater certainty, as they can be confident that the project meets Freddie Mac’s project eligibility requirements assessed for this status.
  • Reduced origination costs, by minimizing the lender’s time spent in project reviews.
  • Potential borrower savings, with a reduced cost to obtain documentation from the property management company or homeowners association (HOA).
  • Early view of eligibility, since lenders don’t need to have a loan origination started to request and receive a Project Certified status.

This Condo Project Advisor enhancement is particularly useful in the current condo landscape. Since 2007, construction of multifamily buildings has skewed sharply towards apartment usage. As a result, the existing condo stock is aging and prone to challenges related to deferred maintenance and critical repairs. An ongoing difficulty for lenders is acquiring and analyzing the data needed to understand any issues or requirements with a condo project—which has only gotten substantially costlier and more time-consuming. Project Certified status can alleviate this process.

In addition, for borrowers seeking pre-approval for their mortgage, Project Certified status can give them peace of mind knowing that the building can be financed—without the lender needing to source project documents, completed questionnaires or financial documentation that can make the homebuying search cost- and time-prohibitive. Getting to the closing table that much quicker is a win-win for lenders and homebuyers.

A Few Steps Lead to Downstream Efficiency

We’ve enhanced Condo Project Advisor so that after a project assessment request (PAR) is submitted, you’ll receive an assessment of the project plus an indication that it may be eligible for a Project Certified review through the Project Certified Submission (PCS) process.

PCS is an easy two-step process:

  1. If it appears on the top of the PAR results page, click the “Submit for Project Certified review” button.
  2. Upload the required documentation to receive a free review.

The process is free and if the documentation meets the applicable requirements, Freddie Mac’s Condo Project Advisor team will assign the Project Certified status within one business day.

Sellers Share Benefits of Fewer Repurchases and Reduced Documentation and Cost

Once a condo project has received a Project Certified status, other Sellers can also benefit from the Project Certified status; this means they may also be able to do minimal project underwriting and have greater certainty in their condo loan deliveries. What’s more, lenders can request a free Project Certified review by submitting required documentation.

Condo Project Advisor—and the tool’s Project Certified status—facilitate the process for lenders originating condo loans and supports Freddie Mac’s mission of making home possible for more borrowers.