Who Really Qualifies for a Condo Loan Anyway?

by July 8, 2009 • 8 comments

Okay let me clear this up from the very beginning – I am not a loan expert nor do I play one on TV, but these days that would be a great idea. I have had several customers come to me wanting to purchase a condo and they assume that BECAUSE they have great credit and good income then they are good to go. Sometimes they even have a pre-qual letter and they really feel good. Well not so fast. Lets talk about the real skinny about who can get a loan and what they can buy with it.

I rely on the good wisdom of some really good lenders here in Bay County which brings me to one of the most important points. In MOST cases when buying a condo it would be best to use a local lender who is familar with the local market. While we are on the subject of Local a local appraiser is another vital part of the deal. So much has changed in the last few years and even more so in just the last few months. Because I am not a loan expert I am going to address just a few of the issues surrounding loans on condos in Florida. I hope to give you just enough to have you running to your local lender for the rest of the story.

In speaking to one of my favorite Bankers today he shared that back in the good ole days (creative license) that loaning money to folks was like a 3 legged stool that was income, credit and assets. If you had 2 of the 3 then most likely you were good to go. Now we throw a whole new monkey wrench and there are many more issues to consider. First you must have all 3 to get you started. Sounds like the way we used to borrow back in the day when you really had to make the money to buy the deal. What a concept?

One huge difference is that just because you have all 3 it is important that you find out if the condo that you are getting excited about is an approved project for that bank. Many banks take into consideration the saturation of loans in one condo complex, lack of people paying their dues and maybe even litigation issues to determine if the project is loan worthy. So not only does the customer need to be loan worthy so does the condo!!! In addition the bank will evaluate the building , it’s finances, and market conditions for your area.

So now your are feeling confident we have passed the first test and then the lender wants to know, “Is this your primary home?” “Is this your second home and vacation spot? Oops you say your primary home is just a few miles down the road??? Now the scariest question of all… Is this an investment property? Again in speaking to my various lender friends there is no such thing as investment loans on condos today. You will need to use the green stuff.

Another issue that many find discomforting is the fact that there are no longer just good old conventional fixed loans for condos and the amount needed to put down is greater and the interest rate higher. I have brought up more questions than answers but this should get you started with the questions you need to get answered by your favorite lender so you can buy that condo while the deals are great from your FAVORITE REALTOR.

I hope this does not serve to scare you away because there have never been so many deals and so many choices for the buyer it just means that lending is now a much more conservative and intensive process. I encourage you to find a lender to work with so you can be ready for those deals when they come up.

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1 jamnolfin July 8, 2009 at 5:08 pm

Do what I did, pay your house off, set up a home equity account and pay cash for it. My interest rate is 3.25% at least for now. Buy at Calypso, our condo is booked solid and we are turning more people down than actually rent. It more than pays for itself. Do you really need a banker to tell you that you dont need 2 mortgages? Whats up Karen, youve had a few people looking at the house across the street

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2 Tim July 8, 2009 at 8:54 pm

My interest rate is 3.25% at least for now
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Sounds like one of the now discontinued Wachovia 1 percent less than prime HELOCs. To bad you ended up at Calypso. That is one of the Waterstone cess pools.

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3 karen smith July 8, 2009 at 9:09 pm

Hey I love it. I agree, using a home equity is a good plan. I have a buyer that wanted to do that but husband balked at it. Calypso is a GREAT rental. I have some customers very interested in Calypso and others who are already loving it and renting it a lot. Which house across the street???? Life is good on the beach is it not???

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4 jamnolfin July 9, 2009 at 12:01 am

Hey Karen, its Jamie. Now you know my alter ego.

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5 Sandy Thompson July 14, 2009 at 11:31 am

I have talked to a few lenders who will do condo loans (including investment), but they require at least 30% down and they cannot be condotels. I didn’t see anything in your article about condotels, but if you’d like to know which ones they are I’ll be glad to provide a list.

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6 Gregg July 14, 2009 at 2:26 pm

Give us a list Sandy

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7 Don July 14, 2009 at 3:17 pm

Good article Karen, you mentioned condo dues not being paid. That would be another great story for someone to research. I have owned vacation/rental property in Gulf Highlands for 9 years and there is a tremendous amount of foreclosures resulting in unpaid maintainence dues. This shortage of dues directly effects the grounds and property appearance. Its a bad combination with unknown results.

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