Changes in Florida Condo Limited Review Requirements

For the past 5 to 8 years, when an investor wants to finance a condo with low rate conventional financing, the condominium project was required to pass a rigorous FULL PROJECT REVIEW, or buy with cash.  The greatest hurdle to passing the full review is that the project must have 10% of annual HOA Fee revenue in a reserve account on both the current year and proposed budget.  Though the financials of South Florida condos are significantly stronger today, many still do not to meet this requirements, and fail the full project review.  This means condo investors have largely been excluded from low interest rate conventional financing for almost a decade.

During this same period, those purchasing or refinancing a condo unit as an owner occupant (primary residence) or second/vacation home have been able to finance transactions under conventional LIMITED CONDO PROJECT REVIEW guidelines.  Limited Project Review is a streamlined process, based on the strength of a borrowers’ credit and down payment.  When the minimums are met, reserves are a “non-issue” as Fannie Mae does not require a budget review and the overall process is simplified.  Variables vary by lender, and loanDepot ONLY requires Fannie Mae’s minimums, nothing added. 

The table below compares Fannie Mae’s minimum condominium down payment requirements for Full Project Review vs. Limited Project Review in Florida.  For all occupancy types passing the Full Review allows borrowers a much lower minimum down payment, which in each case triggers the addition of mortgage insurance.  Here’s the summary: 

FULL PROJECT REVIEW MINIMUM DOWN PAYMENT

•          Primary Residence:     3%
•          Second Home:             10%
•          Investor:                      15% 

LIMITED PROJECT REVIEW MINIMUM DOWN PAYMENT

         Primary Residence:     25%

•          Second Home:             30%
•          Investor:                      30%

Today an investor can purchase or refinance a condo with at least 30% down or in equity, and reserves don’t matter! 

HAVE YOU EXPERIENCED THIS?

1.       Your condo buyer have the ability to meet the limited review down payment requirement, yet don’t necessarily want to invest that much in their purchase.
2.       The lender qualifies and pre-approve your borrower for the lowest down payment, yet the property type is a condo.
3.       The lender submits for a FULL PROJECT REVIEW because it is the only way to close with a low down payment.
4.       The project fails to pass the full review, your borrower is denied and the lender/broker has no low rate alternative because most cannot switch to limited review after a project has been underwritten and fails full review. 

THE UNIQUE loanDepot ADVANTAGE

1.       We inform your buyer of the project review process and the difference between full and limited review.
2.       The borrower is qualified to insure they meet both the limited AND full project review requirements.
3.       Contract is executed, loan is underwritten and project submitted for full review.
4.      IF THE FULL PROJECT FAILS, WE SWITCH TO LIMITED REVIEW AND CLOSE.

This strategy allows the Florida team to amass of list of approve condo projects.  Currently there are over 150 condo projects on our list, and growing. 

Who do you know who closed a condo with cash and would like to cash out, or wants to purchase an investment condo? 

Please call with questions about condo approvals, referrals, scenarios or other loan programs needed to increase your success. 

I’m here to help! 

Norman