Gary Elliott & Sandy Elliott
One third of condo buyers on Marco Island use mortgage financing to buy their condo. The rest pay for their condo using a bank wire transfer from existing funds. A mortgage provides personal benefits such as a mortgage interest tax deduction, leveraging your money, and historically low interest rates available in today’s market. However, in addition to the buyer, a condo also has to qualify for the mortgage.
Before approving a condo for a mortgage, a lender will forward a condo questionnaire for either a limited review or a full review to the Home Owners Association. If you plan to use the condo as your primary residence and put down a minimum of 25% or if this is going to be a second home with 30% down, the lender will conduct a simple limited review. If you are buying the condo as an investment or you do not meet the above minimum down payment criteria, then the lender will conduct a full review.
A limited review looks at the master insurance policy, any pending litigation and some other minor information. A full review looks at the master insurance policy, any pending litigation, the condo financials, and submits many other questions. A recent concern for lenders is that some condos on the island with substantial reserves have elected to reduce the 10% annual contribution to the reserves. Condos without the 10% annual contribution to reserves will not meet conforming guidelines and cannot qualify for a conforming mortgage. Other full review questions confirm that more than 50% of the units are owner occupied and that no more than 15% of the owners are delinquent. Passing either the limited or full review allows the condo to qualify for a conforming mortgage. If the review process determines that a conforming mortgage is not available, then the condo becomes non-warrantable with fewer and more expensive options available for buyer financing.
International buyers tend to pay for their condo using a bank wire transfer, but mortgages are available using foreign national loan programs.
Potential buyers should begin their search by working with a local lender. Your realtor has a list of lenders that are members of the Marco Island Realtor Support Network. The lender can determine the amount of loan the buyer will qualify for based on the buyer’s income and debt. The lender can also determine if a limited review or a full review is necessary. Local lenders have experience with the local condo market and can provide a prequalification letter to accompany any offer.
Marc Creach, lender with Marketplace Home Mortgage 239-236-1276, contributed to this article.