What to look for when buying a condominium in Florida that requires financing?
There are all kinds of loan products out there and the underwriting rules vary considerably but generally one wants to use a ‘conforming’ loan product as these get the best loan rates. Conforming loans are Fannie/Freddie loans and when they talk about loan approval they use the term ‘warrantable’. Typically, a condo is considered warrantable if:
- No single entity owns more than 10% of the units in a project, including the developer
- At least 51% of the units are owner-occupied
- Fewer than 15% of the units are in arrears with their association dues
- The homeowners association (HOA) is not named in any lawsuits
- Commercial space accounts for 25 percent or less of the total building square footage
- The Association transfers AT LEAST 10% of its annual budget into a reserves account. So if the association collects 100k a year from its members then it must set aside 10k of that into a reserve account.
The last one is typically the problem. Many associations do not do this even though 10% is a modest amount. $50 out of a $400 per month maintenance fee would be 12.5%
