Daytona Condo Financing
Even though we very rarely deal with mortgages, and this is the nature of a resort market, where buyers usually purchase condos as vacation homes and pay cash, time from time we end up working with a buyer, who needs financing.
It usually starts with “I have good credit, and my bank told me that there would be no problem to finance a condo”.
We have to tell them that while they may have perfect credit, it is only half of what they need. They also need the condo they like to qualify for a mortgage, and their score, no matter how great it is, can’t help it.
I don’t really want to get into the nitty-gritty of financing condos in Florida, but here are some general points when we discuss condo financing.
There are conventional loans, and there are FHA insured loans (VA, too)
Conventional loans are loans not insured by government agencies. They include FHA Loans, VA Loans, and USDA Loans. Those loans are usually sold then to Fanny Mae (FNMA) and Freddie Mac, which are government agencies. Fanny Mae is actually Federal National Mortgage Association. They purchase mortgages originated and funded by Lenders. When you hear “conforming loan”, it means that it has to conform to Fannie Mae guidelines in order for them to buy it.
Fannie Mae loans do:
· Maximum loan amount $453,100 (some exceptions apply)
· Minimum credit score 620
· Maximum debt-to-income ratio 50%
· Maximum loan-to-value 97%
FHA, which is a department under the Department of Housing and Urban Development (HUD), insures loans meeting certain guidelines. It does not buy loans. These loans are later being purchased by Ginnie Mae —the Government National Mortgage Association (GNMA).
These are FHA guidelines:
· Minimum down payment 3.5%
· Maximum debt-to-income ratio 55%
· Minimum credit score 585 for a 3.5% down payment
· Minimum credit score 500 for a 10% down payment
· Condominiums must be approved for FHA financing
Even if you are getting a conventional loan, and the condominium does not have to be certified by FHA, it does not mean that you have the green light.
The Lender will send the Association a Condo Questionnaire and then make a decision based on the information provided to them by the Condo Association. Some of their requirements are:
The current year budget must show that 10% of the operating expenses in the reserves.
A reserve study in lieu of 10% reserves allocated from the current year budget may be considered if prepared within the past 24 months by an independent 3rd party with expertise in Condominium Project Reserves.
No more than 15% of the unit owners may be more than 60 days delinquent on their monthly HOA dues or special assessments.
No one person or entity can own more than 10% of the total units.
Small 1-4 unit condo projects are eligible as long as no individual owns more than 1 unit.
5-20 unit condo projects are eligible as long as no individual owns more than 2 units.
Commercial space can’t exceed 25% of the total project.
You can’t have litigation against the developer or contractor if it relates to the safety, structural soundness, or habitability.
Knowing that you actually can check with the condo association even before submitting an offer.
When financing a Daytona condo, knowing your credit score is not enough. You need to know whether the condo, you have chosen, is warrantable.
Or, you may turn to a mortgage broker, who is specializing in condo financing, and they may know the condos, that are difficult to finance.
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