Condo Loans in Florida: Reserves, Repairs and Approval

You can qualify personally and still run into a problem if the building does not. Lenders look at the condo project itself, not only at you and the unit, and Florida’s newer inspection and reserve rules have made that review closer. Understanding what an underwriter checks helps you screen buildings before you spend money on an appraisal.

Key takeaways

  • Lenders review the condo project as well as the borrower, and a project can be ineligible even when your credit and income are fine.
  • Under Fannie Mae’s guidelines, projects in need of critical repairs are ineligible until the repairs are completed.
  • Special assessments, reserve levels and association delinquencies can affect approval and your monthly cost.
  • Requirements vary by loan type and lender, so ask before you make an offer.

Why the building gets reviewed

The condo association’s finances and the building’s condition affect the value of the collateral. For conventional loans that follow Fannie Mae’s guidelines, section B4-2.1-03 of the Selling Guide lists project characteristics that make a project ineligible, including projects in need of critical repairs. Lenders are expected to look at sources such as association meeting minutes, financial statements and engineer reports to decide. Other loan programs, including FHA, run their own project approvals, and individual lenders can add stricter rules.

What counts as a critical repair

Fannie Mae describes critical repairs as work that significantly affects the safety, soundness, structural integrity or habitability of the building, or the financial viability of the project. Examples in the guide include material deficiencies that could lead to a critical system failure within a year and projects that have failed a mandatory state or local structural inspection or certification. It also includes unfunded repairs costing more than $10,000 per unit that should be done within 12 months. Repairs funded through a special assessment are treated differently, which is one reason lenders ask what the association has already approved.

This is where Florida’s milestone inspections and reserve studies come in. The reports an association already has, covered in our condo milestone inspections and reserves, are the same documents a lender may ask about.

Reserves and unpaid dues matter too

Lenders also look at the association’s budget and at whether owners are keeping up with their dues. Fannie Mae’s published project standards FAQ gives budget reserves and association delinquency as examples of reasons a project can be marked Unavailable, and loans in an Unavailable project are not eligible for sale to Fannie Mae. In plain terms, a building with thin reserves and many owners behind on dues can be harder to finance, which can shrink your pool of buyers when you sell.

How assessments and fees change your payment

Condo dues and any special assessment are part of what you can afford. A payment of principal, interest, taxes, insurance and dues that looks comfortable can change if the association raises fees to catch up on reserves. When you compare two buildings, compare the total monthly cost, not just the price of the unit. Our mortgage payment calculator is a good place to start, and you can add the monthly dues on top.

Steps before you write an offer

  • Get pre-approval with a loan officer so you know your price range, then ask your loan officer if the project is likely to be eligible for the loan you want
  • Ask the seller’s agent for the association budget, financials, reserve study and milestone inspection summary
  • Find out whether any special assessment is pending or planned
  • Ask whether the building has any open repair projects or a recent structural report
  • Budget for the insurance premium on your unit and the dues, not just the principal and interest

Cash buyers skip lender review, but the same building facts still affect resale value, and the next buyer will probably need a loan.

Condo loan questions

Can I use an FHA loan for a condo?

Only in projects that have the required FHA approval. Read our overview of FHA loans in Florida and ask us to check a specific building.

Does a special assessment stop my loan?

Not by itself. Lenders consider what the assessment pays for, who owes it and whether the project is financially sound.

What if my building is in the middle of repairs?

It depends on the repair, the funding and the loan type. Ask the lender before you commit to the purchase.

This article is general information, not a loan commitment. All loans are subject to approval. For questions, call Quality Real Estate Finance at 407-476-6667.