Let’s face it, when you’re researching Ocean City, MD real estate for sale, financing may not seem like it’s a big issue. In fact, it can be! When buying a condo, your financial application will need to get approved as well as the condo association. While there are more than 5 common issues that can derail your condo purchase, these are the most frequent in the Maryland and Delaware coastal real estate markets.

Enjoy my video interview from my YouTube Vlog with Sam Kotzur of First Home Mortgage in Ocean City, MD. Read a summary of the topics covered below the video.

First off, you may not be buying real estate in Ocean City, MD because of the down payment requirements. Many buyers’ think a 20% down payment is required to purchase a second home or investment property. In fact, you can purchase a second home with a down payment as little as 10% of the purchase price for a second home and 15% for an investment property or vacation rental property.

5 Common Issues That Could Derail Your Condo Financing

When applying for a conventional home loan, you’ll most likely get a warrantable loan secured by Fannie Mae or Freddie Mac. These are 5 things Fannie Mae will not consider eligible for securing your loan with your condo purchase.

#1 Hotel/Motel Condo Projects

A hotel/motel condo project consists of a condominium project that has daily services such as cleaning, front desk reception and nightly rentals available through a company. There are a few buildings in the Ocean City area that have both hotel/motel rooms and condominiums.

#2 Split Ownership Agreements

This is considered a timeshare, and Ocean City has several timeshare/condominium buildings. Some buildings in Ocean City have Hotel/Motel rooms, condominiums, and time share units. This is not a project Fannie Mae will consider.

#3 Active Litigation

If the condo association or HOA has an active litigation case, it may not be warrantable. A litigation case where the association is suing a condo owner or homeowner within a homeowners association is acceptable. However, if the active litigation is related to the building's safety, structural soundness, habitability, and functional use, the building may not be warrantable.

#4 Single Entity Ownership

Single Entity Ownership takes place when one person(s) or business owns multiple units, which does not conform to Fannie Mae’s guidelines.

· Condominium buildings with 5-20 units, a single person or business can only own up to two units.

· Condominium buildings with more than 21 units, a single person or business can own up to 20% of the total number of units within that project. In the past, Fannie Mae required no more than 10%, and this affected some buyers. Now, that the guideline changed, an opportunity may have opened up.

A perfect example is for condo owners that want to buy another unit in the same building for rental purposes.

#5 Non Residential/Commercial Space

Mixed-use buildings in Ocean City, MD and the Delaware beach markets are common. If you’ve ever been to the famous Ocean City, MD boardwalk, then you’ve seen stores on the boardwalk with condo units above the stores. There are a few buildings that could hold you up.

Another example would be buildings with office space or restaurants incorporated into the property. There is trick to buying a condo in a mixed use building. The trick is to make sure there is no more than 35% commercial space within the total square footage of both the residential and commercial space within the building. This recently changed. In the past, Fannie Mae would only allow less than 25% of the building to be non residential/commercial space.

Best Practice for Buying a Condo in Ocean City, MD

While you may be starting your research or maybe you’re familiar with the area, you’ll want to strategize with a professional and local Ocean City, MD Realtor®. Whether you're ready to buy or you’re a year out from your purchase, it will save you time and hassle narrowing down your search and collaborating ideas about the market.

Download Fannie Mae's Ineligible Condo Project Worksheet

Learn all of Fannie Mae's ineligible condo projects to avoid and better prepare yourself for buying a condo in Ocean City, MD and the Delaware beaches.