AL and FL Mortgage News

 




If you are in the market to buy or sell a condo and need financing, there is good news in 2019 that is getting very little marketplace attention.  As we mentioned in a few previous posts, strict lending requirements imposed for a decade have made more than 90% of an estimated 8 million condo units nationwide ineligible for conventional and FHA financing.  In the face of increasing popularity of condos as a great housing solution, Fannie Mae has been the first to see the devastation, smell the roses, and take action and it appears HUD is following suit.

 

In the last three years the most successful way to finance a condo anywhere in the country was to find a unit that was in an eligible project (less than 1 in 10 chance) or put anywhere from 10% to 30% down and hope that whatever made that condo project ineligible would be avoided in a limited review.  This situation and the host of problems it created have forced the masses to seek portfolio or private financing with 20-30% down payment requirements thereby barring most from ever owning a condo.

As we have mentioned before regardless of limited review or full review status, Fannie Mae knows the number one killer of conventional condo financing is high investor concentration, high single entity ownership, and an associations involvement in litigation.  Realizing how damaging this has been to existing owners and potential buyers here is summary of what has changed:

Conventional – more updates coming in June 2019

  1. Investment Concentration – probably the single biggest condo deal killer since 2009
    • Primary and Second Homes – previously set a 50% of the total number of units in the project, now 99% investment ownership is allowed.
    • Investment Property – 99% investment allowed as long as buyer puts 25% down in AL, 30% down in Florida otherwise it still needs to be below 50%

       

  2. Single Entity Ownership – likely the second biggest condo deal killer
    • Previously marked at 10% now expanded to 25%. Fannie Mae allows exceptions as high as 49% if the builder/developer is that single entity and shows a sales and marketing plan to sell those units. Units owned by the developer that are on the market and vacant are not counted/tallied.

       

  3. Limited Reviews vs Full Reviews
    • Recap on Primary and Secondary: Limited reviews in Alabama are still 90% LTV for owner occupied and 80%LTV for second homes. This drops to 75%LTV and 70%LTV respectively in Florida. No change here. The importance of this in light of the changes above can not be over-stated and is probably where the biggest impact will occur.
    • Investment Property Limited Reviews – are now allowed with 30% down. Previously if you were an investor, an automatic full review was required. Most investors were forced to portfolio or private money solutions.

       

  4. Pending Litigation
    • Does not now automatically kill the deal. Single unit damage litigations ok, non-monetary, HOA is seeking is the plaintiff seeking funds, slip and falls ok


Conventional LTV Updates

  • Max LTV for primary increases from 95% to 97%*
  • Max LTV for second homes remains at 90%*
  • Max LTV for investment increases from 80% to 85%*
  • *Please note these max LTVs will require a full project review versus a limited


FHA Condos

Like Fannie Mae It is noteworthy to echo that “Spot approvals” from HUD are now re-branded as “Single Unit Approvals” are rumored to be released in May 2019.  Not seen since 2010 these allow a lender to approve loans on units that don’t have project approval subject to minor limitations.  Once this change is released this will open up FHA financing for condos in all markets across the country. 

At the time of this post there are 124 Approved in FL and 21 in AL but FHA condos projects but the update here is not non-Florida condos can be approved in as little as 48 hours.  Existing HUD approved condos can still be found here


VA Condos
In closing it is important to mention that VA condos never expire.  In Florida there are 1612 with “Accepted” status and in Alabama there are 166.  If you want to know if certain projects in your area are approved, please email us and we can generate and send you a printout.

If you would like to learn more about condo financing in Florida or Alabama, you can apply online 24 hours a day or contact a licensed originator by phone during normal business hours at 888-269-8335.

This information is subject to change at any time.  The information herein does not constitute a commitment to lend.

Photo Credit: Jeremy Kierez @jeremykierez

Disclaimer

Posted by Devin Murray on March 28th, 2019 9:02 AM


Search your local MLS, Zillow, Trulia, etc. and you will find that there are LOTS of condos on the market in both Alabama and Florida. If you are interested in capitalizing on this opportunity of purchasing a condominium, there are MANY questions to ask your realtor before considering a potential property and we always strongly encourage finding a realtor who specializes in condos first and foremost.  If you need financing for your condo, below is the current recent breakdown of conventional minimum down payment requirements for Eligible attached condos in Alabama and Florida based upon occupancy.  Please note all of this information is subject to change at any time. 

Maximum LTVs in Alabama 
Primary - 95%
Secondary - 95%
Investment - 80%

Maximum LTVs in Florida
Primary - 95%
Secondary - 90%
Investment - 80%

By far the biggest puzzle in obtaining financing for buyers and buyer's agents alike is finding a condo project that is actually Eligible for financing.  Below are a few links anyone can access with Fannie Mae (and also with HUD if you are willing to consider FHA financing).  While finding an Eligible condo does not automatically qualify you for the loan or a given down payment, this is a great start to searching for condos in your area if you are interested.

Fannie Mae PERS Look-Up - Updated Weekly
HUD/FHA HRAP Look-up


If you are not finding approved condos by searching your area, especially for those of you searching in Southeast Florida, this is not the end of the road for you.  This is true mainly because a condo can be Eligible even though it is not listed as already approved with Fannie (or HUD).  Even if you or your realtor go through the trouble to calling a long list of condo associations or association management companies in the area, paying fees for them to fill-out questionnaires @ $100+ each, most will have no idea if they ARE or ARE NOT eligible or even what that even means if you ask.  As a buyer, we do not recommend searching for eligible condos this way.

While explaining condo eligibility guidelines is complicated and not something we have room to attempt to explain here, if you are willing to put a little more money down Fannie Mae may allow a limited review approval for financing without requiring a full eligibility review.  The only way to know if you can get the loan with a limited review is to apply for the loan and have your loan officer get an automated approval through Fannie Mae's system.  

Limited Review Thresholds Alabama 
Primary - 90%
Secondary - 80%
Investment - not allowed

Limited Review Thresholds Florida
Primary - 75%
Secondary - 70%
Investment - not allowed

If you can get a limited review status on your automated approval, your lender will contact the association after you apply and send them a limited review questionnaire that is typically 10-15 questions long.  For you this typically means a much more streamlined eligibility process performed directly by the underwriter and more importantly the benefit of getting low conforming rates and APRs.  Again a limited review status doesn't guarantee eligibility or full loan approval.

In the case of a full review the list of requirements by your lender will grow to somewhere around 20-30 more detailed questions and additional documentation compared to those on the limited review.  Also the complexity of a full review typically warrants this detailed documentation being gathered by a third person, like a condo review desk, and not the underwriter assigned to your loan.  The end result is typically increased turn times on the review and a potential for decreased likelihood of eligibility.

Ultimately in the case of a both a limited review and full review here is a list of reasons, ranked by frequency that I have seen since 2004, that a condo project is usually be marked as NOT Eligible. This is in no way a complete list but gives you an idea of what will stop you from obtaining conforming financing on your condo even when your credit, income, and assets qualify.

Common Review Problems for Condos Project Financing

Excessive Investor Ownership: 50% of the total number of condo units can not be owned by investors.  Second home, vacation home, and owner occupants are not categorized as investors. 

Single Entity Ownership: No person or other entity, including the developer, can own more than 10% of the number of condo units

Developer Control: The project needs to have been turned over to the homeowners and 90% of the total units must be sold and closed.

"New" Attached Projects: Are not eligible for a limited review.  Restrictions apply with a full review.

Timeshares: Not allowed

Short-term Rentals: If the HOA advertises, participates and/or facilitates short term rentals the project is ineligible.  If the project operates like a resort/hotel/condotel/ with an on-site check-in rental desk, offers food, and/or cleaning services the project will likely be ineligible.

Commercial/Non-residential Units: These units cannot exceed 25% of the total number of units

Deliquent HOA dues: No more than 15% of the total number of units can be delinquent on their dues.  

ReSale/Title Restrictions: Legal documents in force within the project that restrict sales and transfer of clear title will typically require further review.

Litigation/Arbitration: The project needs to be cleared of any pending litigation.  

Common areas/Recreation Facilities: Unit owners, through the HOA, should have sole ownership interest/rights to use all facilities and common areas.  These facilities (new construction) must be completed at the time of application.

To find out if a condo you want to buy is eligible before you submit an offer or to get pre-approved to purchase or refinance a condo, please email

Posted by Devin Murray on March 8th, 2016 11:21 AM

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