CONDOS … WHAT YOU NEED TO KNOW
Why waste time hunting for a condo you can’t get a mortgage for? Know the facts before you hit the pavement. Obtaining mortgages in some Florida condos may now be virtually impossible, as a result of the new Fannie Mae rules.
Lenders have long been reluctant to provide financing in certain South Florida condo buildings. Many more buildings have been scratched from their lists altogether, as a result of recently imposed Fannie Mae rules.
A handful of lenders ‘blacklisted’ certain buildings (and new condo regulations, imposed in January 2009, made condo FINANCING in Florida exponentially more challenging ). Unless you are well-informed, you risk stumbling across a ’steal’ of an apartment, only to find it’s unattainable, on account of rules prohibiting lenders from providing mortgages in buildings that for all purposes appear stable.
Fannie Mae’s rules created financing hurdles. The new rules pertain solely to Florida, and for the most part, have affected the buildings MOST in need of a vitamin B shot. Fannie Mae’s 2009 regulations literally slammed condo buildings like the plague.
FNMA/FHLMC changes as of January 2009 required that condo conversions and new construction be 70% “under contract” or “pre-sold” before lenders could provide financing. (Previously only 49% of a building’s units had to be pre-sold or under contract.)
Adding insult to injury, if more than 15% of the building’s unit owners are delinquent on their association fees by 30 days or more… (you guessed it!)…. no mortgages will be issued in those buildings either. So, how do you protect yourself… and how do you know where to look, let alone where to buy?
FANNIE MAE CONDO GUIDELINE “REQUIREMENTS” FOR LOANS :
- 15% of units (maximum) can be delinquent (beyond 30 days) on their association fees.
- 70% of the building must be “Under Contract” or already ”Pre-Sold”.
- Seller contributions must be fully disclosed.
- The building must carry hazard insurance.
- 51% of established construction must be owner-occupied… allowing less-than-half to be investor owned.
- 20% of the building (maximum) may be designated for commercial use.
- 10% of the units (maximum) may be owned by any single entity.
These rules undoubtedly were put into place to strengthen the current condo market, and protect buyers. Good intentions aside, the short term effect will undoubtedly negatively impact South Florida’s Condo Market, at least where buyer financing is concerned. The new laws penalize sellers, potential buyers and investors… over the short run. They affect anyone and everyone residing in the targeted condominiums. Long term, the idea is certainly to ‘help’ the situation, so let’s hope it does.
With delinquency of association fees now a condition for funding loans, and the plethora of buildings in trouble (in up and coming areas like Brickell and Downtown Miami… as well as scattered across South Florida) Florida’s financing hurdles pose potentially insurmountable road blocks for owners desperate to sell and barely hanging on…. and are a hard pill to swallow for buyers ready to make their move in an otherwise favorable buyers’ market, but in need of financing.
Despite favorable pricing and abundant condo availability, many borrowers will be hard pressed to get mortgages now.
Gone are South Florida’s overinflated housing prices of a couple years back. (Good news for buyers in general!) In a market ripe with opportunity, and reasonably priced condos available to be snatched up… there is a silver lining … but for cash buyers!
Sadly, for those needing financing, many “choice” opportunities now require cold, hard cash. How many “cash’” buyers are there out there… with bills stuffed under their mattresses? The FNMA/FHLMC changes have, and continue to determine which buildings buyers can (and can’t) obtain financing in. Some of the newer buildings offer opportunities for cash buyers looking for long term investment returns.
Buildings will need to be pre-screened… in much the same way as buyers and tenants themselves have been… and building eligibility “stats” will change day by day, fluctuating between eligible and ineligible. Relying on a knowledgeable Realtor will be increasingly more important. Don’t waste time traipsing through properties that won’t qualify!
YET ANOTHER OPTION : MIAMI’s TOWNHOUSES … read more here