7 Dumb Financing Related Mistakes when Buying a Condo

By: Melissa & Denise Stewart

Buying and financing a Condo, especially in South Florida, can be a difficult process. Although there are many minor mistakes buyers can make in this process, these are 10 mistakes that are commonly made that can disrupt your loan approval, and possibly cost you the deal you are looking at:

1. Not Listening!!! You are going to be getting a lot of advice from people you are dealing with. You mortgage lender is going to tell you not to buy certain things while you are in the approval process. Your Realtor is going to tell you certain things not to say in front of the seller or the seller's agent. People give advice because they have experience in these matters, and you should listen, and if you do not understand, ask why.

2. Not Understanding the Process. Buying a condo is a process, and there are several people that can assist you. You are going to be dealing with Realtors, Mortgage Lenders, Title Companies, Attorneys, Condo Associations, Inspectors, Appraisers, and other assistants that are there to assist in the process. If they ask you for information, there is a reason why. If they ask you to email it, don't mail it. If they ask you to call them back with information, don't wait a couple of days to call them, because there are deadlines, and they cannot do their job for you, without your assistance. 

3. Not budgeting for closing and other costs. If you are buying a $400,000 condo, and you are putting down 45%, and you only have $100,000 in the bank, you are going to fall short. The reasons are that there are closing costs and escrows associated with your purchase, and you are going to have moving expenses associated with moving your furniture, together with "move-in" expenses like buying end-tables, throw rugs, and other miscellaneous items. As part of understanding the process, you will have the opportunity to speak with the mortgage lender and title company, and between them they will be able to give you estimates of exactly what you can expect to pay at closing.

4. Looking for a condo that exceeds your limits. One of the reasons you should speak to a mortgage lender before you seriously start looking to purchase is that the mortgage lender will be able to tell you exactly what you can afford to purchase beforehand. You may be surprised that you can even afford a 3 bedroom condo, rather than the 2 bedrooms that you thought you would be limited to. On the other hand, because of the taxes and condo fees, you also could be limited to condo of a certain value, unless you are able to receive some assistance from a family member. Bottom line is, why be disappointed, ask your mortgage lender what you can afford before you venture out looking for condos you can't afford. 

5.Getting Pre-Approved, and not getting Pre-Qualified. Most buyers do not know the difference between being pre-approved for a loan, and being pre-qualified for a loan, and a lot of mortgage lenders play tricks with buyers. There is a major difference, and sometimes as a borrower you will find out the hard way. Basically, anyone can get pre-approved for a loan because the lender is stating that based on the information you provided (even verbally), they can make a loan to you AFTER they confirm all of the necessary proof and documentation. A pre-qualification involves the mortgage lender approving you for a stated loan for a stated period of time, only after the lender has seen and approved the documentation, including bank statements, pay stubs, your credit report, tax returns, and other supporting documentation. A lot of sellers will not even pay attention to a Pre-Approval letter, and want to see a Pre-Qualification letter if you are presenting an offer to buy a condo.

6. Using the wrong mortgage Lender. The mortgage lender you choose can be the difference between getting a loan, and losing a deal. Choose a mortgage lender that can give you references of buyers that have recently closed on a condo in your area. Never choose a mortgage lender based solely on the promise they are making to get you a cheaper rate of interest. What you are going to find out is that most rates being offered are generally about the same, based on whether they are fixed or adjustable rate mortgages. The mortgage lender you choose needs to understand the local market, and be able to get the condo approved for your loan, as well as get you approved.

7. Not reading the Condo Docs and Rules & Regulations. These are the rules that you have to live by, and sometimes get your financing approvals by. Yes, there are certain condos and co-ops that regulate or restrict the amount of a mortgage that you can obtain. The other rules that can affect your purchase relate to the number of occupants, number of cars, types of vehicles, your ability to rent the unit, and even age restrictions. The bottom line that in Florida, the Seller must provide a Buyer these documents, so you need to read them, or hire an Attorney to read them for you.

 If you have any questions about financing your condo, or need a reference for a good mortgage lender, call Denise at 954 881 9148 or email denise@condo.net