When applying for a mortgage on a condo, both the borrower and the condo association will need to be approved by the lender. This means that the lender will gather and analyze a series of documents and information about the condo association including but not limited to
- Their annual budget
- Amount of reserves available
- Investment-to-resident occupancy ratio
- Ownership percentages
- Association dues default
- Information regarding any pending litigation
- Master insurance coverage sufficiency
In order to get the documents collected that the lender will need, the lender will order condo documents directly from the association. There is typically a fee charged to the borrower that the condo association will need to collect for their time and effort in disclosing these items and completing a condo questionnaire.
The condo documents and condo review questionnaire typically take 5-21 days to be completed depending on the timeline and staffing of the specific condo association. Many associations do offer to rush these items if necessary but will almost always charge a higher fee to do so. Once the lender receives the documents, their underwriting process will typically require about another week or so to review and approve the condo association.
Oftentimes, there are budget or documentation issues that can cause delays, issues or an actual loan denial for a variety of reasons. One great way to avoid issues as a borrower is to put at least 25% down on the loan. When only borrowing 75% or less of the value of the new condo, a “limited condo review questionnaire” may be used in lieu of the full questionnaire. A limited condo review can be very helpful since many of the questions the lender typically requires answers to can be omitted or skipped on the limited review questionnaire.
In the event that the lender identifies an issue during the underwriting of the condo association, the condo association may be denied and, thus, the condo association will be deemed “non-warrantable”. This means that no Fannie Mae or Freddie Mac conventional loan option will work.
Furthermore, when using a VA or FHA loan, there are many additional complications that can come up when purchasing a condo, even if the condo association is warrantable.
Fortunately, with a good local Florida mortgage broker like The Moore Lending Group, financing is often available even for a non-warrantable condo as stated above. If you have questions about condo financing or need help getting funding for your new Florida condo purchase, please feel free to contact your loan officer today to further discuss your options.