If a person is considering buying a condominium in Fort Lauderdale, they may have to meet special requirements for obtaining approval for their mortgage loan application.
While the laws are designed to protect lenders, they also protect consumers and allow them to look carefully at the condition of the unit they want to buy and the community in which it is located.
The Federal National Mortgage Association (FNMA), or “Fannie Mae,” is a federally-supported company that Congress originally chartered. It is intended to assist in mortgage securitization, which ensures that lending institutions, such as banks and credit unions, have the funds to loan money to purchasers of single-family residences or other residential units, such as condominiums.
The Federal Home Loan Mortgage Corporation (FHLMC), or “Freddie Mac,’ is similar to Fannie Mae. It was created in 1970 to enlarge the secondary market for home mortgage loans in the U.S. As Fannie Mae does, Freddie Mac buys mortgages, pools them, and sells them as mortgage-backed securities to investors.
This market for mortgage-backed securities has the effect of increasing the supply of money available for mortgage lending. It thus increases the supply of money available to consumers for getting mortgage loans to fund new home purchases. This can lower interest rates and make mortgage loans more affordable to more people.
The Veterans Administration (VA) and the Federal Housing Administration (FHA) are two other players in the home mortgage loan arena. Mortgage loans from the VA are available only to veterans of the military branches and their families. Loans from the VA allow borrowers to take out a mortgage loan with no down payment. They are quite popular, both in Florida and elsewhere.
The federal government offers FHA loans at lower interest rates than those on the open market. Loans from the FHA allow people to buy condos and other homes at a lower price than they would pay otherwise.
The issue is that the VA and the FHA must approve condominium communities and projects if people want to use VA or FHA loans to finance their purchases. Not every condo project can get approved by the VA and FHA. A condo association must apply for approval, and only some that apply are approved.
If a person wants to buy a condo unit in a project that has not already been approved, then the person would have to go through a time-consuming procedure to get a condo community approved. Or the residents of a condo project interested in making their units as marketable as possible would go through the procedure, so potential buyers of all units can get VA or FHA loans if they otherwise qualify.
Below is detailed information about how a condominium project can obtain FHA approval. The VA has its own extensive approval requirements, which can be reviewed online.
Condominiums must meet a set of FHA requirements if buyers are going to qualify for mortgage loan approval. However, most condominiums do not qualify for FHA approval. Only some do, and this limits the availability of condominiums to people who might be interested in them as a lower-cost housing option.
Many condo communities do not pursue the FHA approval process because it is expensive and difficult. This means that the only way for a borrower to get a condo is with a conventional loan.
With a conventional loan, there are many fewer requirements to meet. Other than certain basic industry standards, no other requirements would prevent you from getting a conventional loan for a condo.
On the other hand, FHA loans have a set of stringent requirements for condominium projects. A person cannot get an FHA loan to buy a condo unless the FHA has approved the condo project in which it is located.
The requirements for FHA approval of a condo community are as follows:
A person who wants to use an FHA loan to buy a unit in a condo project is limited to buying a project on the FHA-approved list.
It takes time to get FHA approval. It also involves submitting quite a bit of documentation, and it has a cost. So many condos do not even attempt to get approval, or they may have tried to win approval and been denied.
Since the approval process for acquiring a VA or FHA loan is long, or such loans may not be available, as explained above, the bulk of condo financing is left to conventional condo loans in Fort Lauderdale and other Florida areas.
Still, a condo project has to pass a review by the underwriting department of the mortgage lender before a person can be awarded the loan. Fannie Mae and Freddie Mac are responsible for the nationwide underwriting of most conventional loans.
Recently, in response to the hardships that the condominium market has experienced in the Fort Lauderdale, Florida area, Fannie Mae created a “Special Approval” designation specifically for purchasing condominiums in Florida. The strict requirements previously enforced may have been lifted for certain condominium units that qualify for the Special Approval designation.
Generally, aside from the Special Approval program, Fannie Mae and Freddie Mac have created two categories of condo approvals. The “Limited Condo Review” refers to a program that is offered for loans that are considered low-risk loans. Condos underwritten as limited condo review loans are more likely to be approved.
Condominiums underwritten under the limited review program are much more likely to win approval than those submitted under the full review program. In South Florida, for example, less than 10% of loans submitted for full condo review win and close. So, borrowers often choose a limited review condo mortgage loan.
The loans that qualify for limited review are as follows:
The maximum loan-to-value rates must be as follows:
“Full review” condos require a more detailed underwriting analysis for loan approval. The things that most often cause a denial of a Fannie Mae and Freddie Mac Full Condo Project Review are as follows:
Factors that a person should consider when deciding to ask for a full review or limited review loan are as follows:
In the past, it may have been difficult to obtain a mortgage loan for a condominium unit in Ft. Lauderdale, Florida, under the Fannie Mae program. This was because of very adverse market conditions in past decades and strict eligibility requirements imposed on those seeking mortgage loan approvals.
For example, many purchasers of condo units did not qualify for a mortgage loan unless the borrower could make a down payment of 20% of the purchase price or even higher. This may be true with some lenders even today.
In addition, there was and still is an issue in that a condominium project must pass a full review by a loan underwriting department before a potential purchaser can be awarded a loan that Fannie Mae or Freddie Mac underwrites.
The first requirement for eligibility under the Special Approval program is that the seller’s loan must already be securitized under the Fannie Mae program. New loans can qualify on a case-by-case basis. The following factors are weighed in determining if the requirements will be waived:
Fannie Mae maintains a complete list of condominium projects that have already been approved. A person can go online to learn whether a condo they may want to purchase has the Special Approval designation.
It is hoped that the Special Approval program will help stimulate the Fort Lauderdale condo market.
Otherwise, loans are available to fund the purchase of condos in Fort Lauderdale, but a buyer who needs a mortgage loan may have to do some work to win loan approval.
If you are having trouble getting a mortgage loan to buy a condo in Fort Lauderdale, a mortgage lawyer in Fort Lauderdale, FL, can help you. Whether you are selling or buying a Fort Lauderdale condo, a lawyer can help buyers qualify for mortgage loans. They can help you stay up-to-date in the ever-evolving market for condominiums in Fort Lauderdale and other markets in Florida.
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