Buy In A PUD or Townhouse
A PUD is not a condo, and the project review is waived apart from some basic requirements that must be met.
A PUD is not a condo, and it does not carry condo project paperwork.
You own your lot, the HOA owns the common elements, and you pay a fee to maintain them.
- You hold title to your lot and to the improvements on that lot.
- The HOA holds title to the common elements, and you pay a fee to maintain them.
- Fannie Mae does not require a PUD Eligibility Letter.
- HOA assessment priority must not exceed six months of regular common expense assessments.
- Insurance must be met for title, hazard, flood, and liability on a new project.
- A detached home titled as a site condominium may be considered a PUD in some instances.
Project review is waived apart from some basic requirements
Project warranties are not required on at least one program
Townhomes are an eligible property type
The master policy must cover 100% of replacement cost
Deductibles are capped at 5% of the policy face amount
Zoning alone does not make a subdivision a PUD
What is the Saxton PUD and Townhouse Home Loan?
A home loan for a townhouse or a house inside a planned unit development with an HOA and shared common areas.
A PUD is a project or subdivision that consists of common property and improvements owned and maintained by an HOA for the benefit and use of the individual PUD units. Four things are true in every one of them. You hold title to your lot and the improvements on that lot. The HOA holds title to the common elements. You have a right to use those common elements. You pay a fee to the HOA to maintain them.
Most buyers meet the term at the appraisal, when the report comes back marked PUD. It rarely changes the file. Fannie Mae requires that PUDs comply with all requirements published in the Selling Guide, and a PUD Eligibility Letter is not required. For properties located in a PUD project, the project review is waived apart from some basic requirements that must be met. On at least one program, project warranties are not required for residential units located within PUD projects.
There are limits. A project with no common property and improvements, no required establishment of and membership in an HOA, and no required payment of assessments is not a PUD at all. Row homes are ineligible on at least one program even though townhomes are eligible. Where a PUD project is subject to a ground lease, a deed restriction, or a shared equity arrangement, PERS approval is required. Above $750,000, at least one program allows primary occupancy only and a maximum 43% DTI.
Why choose the Saxton PUD and Townhouse Home Loan?
This is for the buyer under contract on a townhouse or a house in a planned unit development who was told it is a PUD and does not know what that changes.
Fannie Mae Sets The Rules
PUDs must comply with all requirements published in the Fannie Mae Selling Guide. That is the standard, and it is public. For properties located in a PUD project, the project review is waived apart from some basic requirements that must be met, so the file moves on the strength of you and the property rather than on a long project questionnaire.
Some Subdivisions Are Not PUDs
Projects that have no common property and improvements, do not require the establishment of and membership in an HOA, and do not require payment of assessments are not PUDs. If your subdivision has no HOA and no assessments, you are buying a plain single family home, and none of the PUD requirements ever enter the file.
Larger Loans Add Conditions
On at least one program, a loan amount above $750,000 carries added conditions. Primary occupancy only. SFR or PUD only. A maximum 43% DTI. Full documentation or bank statements only, and fully amortizing only. A PUD still qualifies at that size, but the file has less room, so plan for the tighter DTI before you write the offer.
Ground Leases Need PERS Approval
PUD projects subject to a ground lease, a deed restriction, or a shared equity arrangement require PERS approval. That approval happens at the project level, not on your loan alone, and it takes time your contract may not have. Ask the HOA or the listing agent whether any of the three applies before the appraisal is ordered.
Row Homes Are Not Eligible
At least one program lists townhomes as an eligible property type and marks row homes ineligible in the same line. If the home is a true row home, that program is out. Find that out early rather than after the appraisal. Other programs read the property differently, and the eligible list across programs is long.
Four Tests Define A PUD
Each unit owner holds title to the lot and the improvements on the lot. The HOA holds title to the common elements. The unit owners have a right to the use of the common elements. The unit owners pay a fee to the HOA to maintain the common elements for their benefit. All four, or it is not a PUD.
Hear From Homeowners Like You
Frequently Asked Questions
The questions buyers ask once the appraisal comes back marked PUD.
No. In a PUD you hold title to the lot and the improvements on that lot, and the HOA holds title to the common elements. That is a different form of ownership. It also reads differently in underwriting. For properties located in a PUD project, the project review is waived apart from some basic requirements that must be met, and on at least one program project warranties are not required for residential units located within PUD projects.
Four things have to be true. You hold title to the lot and the improvements on the lot. The HOA holds title to the common elements. You have a right to the use of them. You pay a fee to the HOA to maintain them. Zoning is not a basis for classifying a project or subdivision as a PUD, so a zoning map will not answer the question. The appraisal and the title work will.
No. PUDs must comply with all requirements published in the Fannie Mae Selling Guide, and a PUD Eligibility Letter is not required. What remains is a short list of basic requirements that still must be met, mostly insurance and title items. There is nothing for you to order and nothing for you to file. Your loan officer collects what is needed directly from the HOA and the title company.
Priority of common expense assessments, meaning HOA fees, must not exceed six months of regular common expense assessments, even if applicable law provides for a longer priority period. Some states grant an HOA a longer priority period than that. The loan still holds to the six month limit. This is a title and lien question the closing agent works out, and it is not something you have to solve yourself.
Insurance requirements for PUD projects must be met for title, hazard, liability if it is a new project, and flood. The master property insurance policy coverage amount must equal at least 100% of the estimated replacement cost value of the project improvements, including common elements and residential structures. The maximum allowable deductible is 5% of the face amount of the policy. Your loan officer requests the master policy from the HOA.
That is usually a site condominium, where the borrower owns the land on which the structure is located. Those properties do not require condominium documentation, and in some instances they may be considered a PUD. The paperwork follows the title, not the look of the house. Send the recorded documents early so the file is set up the right way the first time.
Yes. Row homes are ineligible on at least one program even where townhomes are eligible. PUD projects subject to a ground lease, a deed restriction, or a shared equity arrangement require PERS approval before the loan can move. Above $750,000, at least one program is limited to primary occupancy, SFR or PUD only, a maximum 43% DTI, and full documentation or bank statements. None of those is a decline on its own, but each changes the path.
Find out what you qualify for
Send the address and the name of the HOA. You will get a straight answer on whether the file treats the home as a PUD, which basic requirements still apply, and whether a ground lease or deed restriction puts the project in front of a longer review. Get a fast, no-obligation pre-qualification today.
Get Pre-Qualified*Loan amounts, rates, terms, and down payment requirements are subject to credit approval, income and asset verification, and program eligibility. Rural housing financing is governed by USDA area loan limits and income limits rather than by conforming loan limits. Down payment and cash-out limits vary by occupancy, credit score, and documentation type. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.