This is an interesting story that I heard. An applicant with a excellent credit score, high paying job and strong asset allocation was turned down to purchase an investment property at the Boston Ritz Carlton. The reason? The Ritz Carlton condo association has inadequate condo reserves, thus, non-compliant for the buyer to obtain an FHA loan for an investment property. The new guidelines require the following:
The condominium/homeowners association must have at least 10% of its budgeted income designated in a capital reserve fund for replacement reserves and adequate funds budgeted for the insurance deductible…
At the present time, the Boston Ritz Carlton, (according to my mortgage broker) has only a 3.5% condo association reserve.
I wonder how many other Boston luxury buildings have inadequate condo reserves?