During the last 12 months, out of the 556 condos listed as “sold” on the Marco Island MLS, 384 (69%) were cash purchases and 172 (31%) were financed with a mortgage. Sellers prefer cash offers, and as the data clearly shows, there are plenty of buyers with available cash. Some cash buyers opt for a mortgage shortly after closing. Today’s borrowers are enjoying historically low interest rates and reasonable down payments on condo purchases. Condo loans in this area are typically approved 30 to 45 days from application. There are a number of mortgage professionals on the island who are familiar with the market requirements and processes to facilitate a stress-free loan process.
Many conventional loan guidelines for condos are established by Fannie Mae, a government sponsored agency. Fannie Mae’s role is to expand the mortgage market by securing mortgages in the form of mortgage backed securities, which in turn allows lenders to make more loans. One of Fannie Mae’s guidelines is a maximum loan limit of $417,000. Loans in excess of this amount are called “jumbo loans.”
Marco Island’s 11,000 plus condos are a mix of vacation/second homes, primary and investment properties. The customary down payment for primary or second home buyers on Marco Island is 20% of the purchase price. Fannie Mae guidelines require that an owner occupy the condo for a portion of the year in order to qualify as a second home.Investment property requires a larger down payment, usually a minimum of 25% down.
As part of the loan process, mortgage lenders require a full or limited review of the condo association. This is to ensure that the condo has adequate reserves to cover its operating budget. In addition, the lender wants assurance that there are no pending lawsuits against the condo association, and that the association has sufficient insurance coverages. Lenders also check the residential delinquency rates on the condo’s HOA fees. Other checks include the ratio of renters to owners (no more than 51%), and that the condo bylaws and documentation are in good order. All investment properties are subject to a full review. A limited review is conducted depending on the amount of the buyer’s down payment, and whether the condo will be used as a primary or second home. These reviews are conducted through a questionnaire sent to the condo manager.
Before the condo review process starts, the lender will first check the credit profile of the borrower, including debt to income ratio, cash reserves and other information.
When making an offer to purchase a condo, the buyer selects a method of payment – cash or financing. For offers with a financing contingency, a preapproval or a commitment letter from a local mortgage professional gives the seller confidence that the sale will go through. Generally these letters take a short time to prepare and are worth the effort to obtain.
Marc Creach of Marketplace Home Mortgage 239-227-2500 assisted in this article marccreach.marketplacehome.com