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Condo Mortgages

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Condo Financing

RK Mortgage Group is a leader in condo financing. Condominiums offer a lot of convenience and flexibility. They also have different mortgage requirements than a traditional home. That's why we offer very exclusive product options for condos, whether they meet Fannie Mae’s guidelines or not. Benefit from our experience in getting you the best condo financing at a lower rate.

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When discussing Condo Financing there needs to be a a talk about the Condo Mortgage Rules totally differ from the underwriting guidelines of any other property type. Also focusing on conventional Condo Financing it needs to be noted are two types of reviews full and limited reviews. It should also be noted that regardless of a loan being a purchase or if a borrower is refinancing a condo mortgage these rules apply. Also keep in mind that FHA requirements are a totally different product and has totally different guideline requirements. Also keep in mind that in these reviews the underwriter is looking at the ability to do Condo Association Financing not just a loan on a single unit in a project. When financing condos the overall financial health of the condo HOA is measured for lending.

However, in this discussion before defining what a FULL review vs a LIMITED review is it has to be discussed that conventional lending agency underwriting guidelines have different Loan To Value (LTV) ratio requirements based on the location of the unit. For established projects not located in Florida the max LTV on an owner occupied loan to qualify for limited review is 90% LTV where ian established condo project as the subject unit in Florida requires a max 75% for an owner occupied loan.

Now to define what these two types of conventional Condo reviews are.  First a FULL condo review is for the most part a more indepth review of a condominium project. For an established project this means a review of title, HOA cert/ Condo questionnaire, flood Cert, current year operating budget, reserve study (that meets agency guidelines of being no more than 3 years old from the time of underwrite and conducted by a reputable third party), Homeowners Insurance (HOI) and appraisal. However, based on the documents noted above more information or docs may be required based on findings. 

Although it should also be noted that agency guidelines define an established project as a project containing attached condominium projects that meet the following:

●    Projects that are 100% complete and not subject to any additional phasing or additional construction.

●    At least 90% of the units in the project have been sold and closed and,

●    The HOA has taken control from the developer

Established condominium projects located outside of Florida require limited review when the LTV ratio is above 90% for an owner occupied loan, 75% LTV for loans that have second home occupancy. Also keep in mind that all non owner occupied loans require full review regardless of the LTV on the file. However, if the project is located in Florida full review is required on established projects for loans with an LTV higher than 75% where the occupancy type is owner occupied. Although for established projects in Florida on second home loans full review is required for LTV’s above 70%. Although again it doesn’t matter where the unit is located if the occupancy type of the loan is investor or rental property/ non owner occupied full review is required.

FULL review is also always required Condo Construction Financing where the subject unit condo project is a new construction or newly converted project regardless of occupancy and LTV. Agency condominium underwriting guidelines define new construction as the following:

●    Projects that are not 100% complete and are subject to additional phasing or construction,

●    Less than 90% of the project is sold and conveyed/ closed to unit purchasers, and

●    The developer is still in control of the project.

●    Project that have been converted within the past three years under full or non gut conversion underwriting guidelines also fall under the scope of new construction.

Now much like an established a FULL review the same documents are required like; title, HOA cert/ Condo questionnaire, flood Cert, current year operating budget, reserve study, Homeowners Insurance (HOI) and appraisal. 

However, for new construction condominium projects require additional documentation along with the above noted items for review. 

●    Condo Declarations (AKA Master Deed, Condo Declaration, or CC&R),

●    Bylaws,

●    Articles of incorporation (If applicable and required within the state the subject unit is located in)

●    Occupancy Cert showing that either entire subject legal phase or entire project meets guideline requirements for substantially complete.

Much like how the guidelines differ on LTV for FULL review differs for Florida compared to the rest of the country so do the requirements for new construction or new conversion condo projects in Florida. New construction condominium projects located in Florida are only acceptable through agency financing if approved through agency PERS approval.

Now LIMITED review is a horse of a different color. For established condo projects located outside of Florida are able to be done through LIMITED review with LTV and owner occupied with LTV of 90% and lower. For second home loans done in established project the max LTV allowed for limited review is 75% and lower. Again non owner occupied loans are not eligible for limited reivew regardless of location of the unit.

However, again in Florida for established condominium projects for loans that are owner occupied the max LTV is 75% or lower. For second home loans done in an established project the max LTV for LIMITED review is 70% or lower. Again non owner occupied loans are not eligible for LIMITED review in Florida. 

Condo Financing can be a complex undertaking but; half the battle is understanding condo mortgage rules and what documentation and how much documentation is needed. Knowing this can help to speed up review process and helps keep pipelines and Estimated Close of Escrow is always helpful.