Financing

Recent turmoil in the financial markets has caused U.S. financial institutions to tighten their lending guidelines and make it more difficult to obtain financing on condos. It is even more difficult in cities that experienced the biggest booms and busts and which now have lots of troubled projects and are seeing the highest foreclosure rates. Mortgage lenders will want to verify all of the information on your application, including your income, assets, job status, credit history and credit score, and where you got your cash for a down payment. Fannie Mae, Freddie Mac and FHA account for around 90 percent of all loans being approved.  So if you’re looking for a home loan, you’ll need to abide by their rules. With FHA loans, most condo buildings must be “approved” properties, or buyers will not be able to finance their purchase through FHA.

FANNIE MAE CONDO DESIGNATION

Fannie Mae and FHA have recently released lists of condo projects around the country that are approved for financing. These approved projects are then eligible for government backed loans and smaller down payments for interested buyers. These loans usually only require the buyer to put down 3.5 percent and allow for a speedier qualification and purchase process.

The condominium projects that are approved by Fannie Mae must:

  • Have less than 15 percent of condo owners in the building delinquent on their condo fees
  • The association must have enough funds on hand to meet the deductible of their insurance policy
  • At least 70 percent of new condo units must be pre-sold
  • At least 10 percent of the operating budget must be set aside for reserves
  • Projects can not contain more than 20 percent non-residential space
  • No more than 10% of the units may be owned by a single entity

These requirements help to insure that the condo projects are healthy and that the individual units are generally solid investments.

LIST OF FANNIE MAE APPROVED CONDOS THROUGHOUT FLORIDA

https://www.efanniemae.com/syndicated/documents/dps/condopud/FL.pdf

FOREIGN NATIONAL MORTGAGES

You won’t find foreign national investor mortgages at the major U.S. banks. In September 2008, the largest mortgage lenders all but eliminated foreign national home loans from their respective product menus. This eliminated a huge source of mortgage money and it trickled down to the smaller mortgage players that sold their loans “up the chain”.  Around the same time, mortgage brokers were closing their doors and leaving their Web sites intact. This is why you can still find hundreds of Web sites catering to foreign national buyers but can’t get anyone to return your phone calls or emails.  Most are no longer in business.

Financing Facts

Look for “private” investors to finance foreign national mortgages: Major U.S. banks don’t want to finance foreign national investment loans, but there is plenty of money available.  In every U.S. market, there are always small banks and financiers with direct ties to the community that want to lend in it.  Because these groups know the real estate scene so well, they will usually make common sense decisions and don’t immediately reject foreign national buyers. “Private” investors each have their own risk tolerance so expect mortgage terms to vary from source-to-source.

Be prepared with a downpayment of at least 30 percent in U.S. dollars: Private investors are scared of foreign national buyers because the borrowers often live halfway around the world. In other words, there’s no way to hold foreign national buyers accountable should their home loan go into default. Foreign national buyers should plan on putting a fair amount of their own money into their home purchase. 30 percent is the minimum in today’s market and it carries the highest interest rates and harshest loan terms for foreign nationals. A 40 percent down payment can soften the rates and terms, but it’s at 50 percent where the real shift happens. With a 50 percent payment or more, foreign nationals get access to most attractive mortgage rates and very loose terms. This can include reduced documentation, reduced costs, and easier underwriting.

The best way to buy distressed real estate – CASH!: With so many transactions now involving the banks on the selling side due to a short sale or foreclosure, these types of transactions can not have any financing clauses. Banks will want to see a proof of funds letter with the offer submission. For a second home or vacation property, many people take out equity lines of credit on their principal residence if they do not have enough funds available. Once a buyer has this money in their account, they will be ready to act once the right property becomes available to them.

MORTGAGE CALCULATOR