Regina Corcoran's - "Pursuing the American Dream"
Sunday, November 1, 2009
Cash for condos

By Regina Corcoran Special to The Citizen

Financing condominium units in Florida is tough these days. It doesn't take Stephen Hawking to tell you that there are too many condo projects in many parts of Florida.

Here is the good news. It used to be that financing a condo in a building with fewer than five units was impossible. This is not so anymore.

A site-built condo is as easy to finance as a single-family residence. It is the duck of condodom. That is, it walks, quacks, etc. Since it looks like a house and has little or no common areas, almost all typical financing is available.

Two- to four-unit condo projects are as simple as any other condo complex.

Now, however, projects with more than 200 units get the kid glove treatment. They attract all sorts of special handling.

Only a buyer with more than one birthday per year can get a new first mortgage on a condo greater than 80 percent of the purchase price. The only exception is a buyer using a Veterans Affairs (VA) loan. Those borrowers still can get 100 percent purchase money.

If the condo enjoys "most favored nation" status, in some rare instances, borrowers might be able to get a second mortgage up to 95 percent of the purchase price. It must be on the Fannie Mae approved list. We have a few of them locally.

Those also are the only units non-owner occupants will be able to buy with typical conventional methods. Even the Federal Housing Administration (FHA) only lends a maximum of 75 percent on condos.

Be aware that VA and FHA financing are available only on condos approved by VA and/or FHA. There are only two complexes in south Monroe County.

Current condo owners with a Freddie Mac loan who want to refinance solely to get a lower rate or a fixed rate are in luck. Using the Home Affordable Refinance Program (HARP), a new loan on your condo is available.

Loan to value up to 105 percent is permissible. The condo project does not have to meet current eligibility requirements. Even non-owner occupants may get loan approval using this mortgage type.

You can't get conventional financing on a condo if:

• It is a condotel. The definition includes condos that permit short-term (less than one month) rentals, units that are sold furnished, project names include hotel, motel, inn, resort or lodge or projects that provide a bellman.

• The complex has less than 51 percent owner occupancy. This is very important. Find out what the condo manager's hot button is. Take a German chocolate cake, an aged bottle of wine or a pony for the grandkids.

The condo manager must count each of the owner-occupied units and each of the units that are legitimate second homes. It will be a laborious, time-consuming job. Thus, a really good "thank you" is called for.

Without a careful examination of the records, it's hard to reach that all important 51 percent.

• More than 10 percent of the units are owned by a single entity.

• Two units or more have been conveyed to a single owner using only one deed. Maybe they broke out a wall between two units and combined them into one very large unit.

• Commercial use in the project exceeds 20 percent of the total square footage.

• More than 15 percent of the units are delinquent on their homeowners' association fees. Beware. There could be a big difference between 15 percent delinquent dues versus 15 percent of units are delinquent.

• The project can't prove it has sufficient building, windstorm and flood insurance.

However, Fannie Mae, FHA, and VA all agree on one point: An unlimited number of villains, vixens and vampire inhabitants is permissible.

What do you think?

Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.