Condos that don't have 10% in reserves require 20% down ?

7 Replies

I live in south florida and I'm currently looking to buy a condo to live in it for a while then rent it out , however I have been running into a problem .I have been approved for 150,000 with Quicken Loans . This amount only leaves me with the option of buying a condo , but my loan officer says that if the Hoa does not have a min of a 9% in the reserves they would require a 20% down . Most of the condo that I have been interested don't have the 9% . I wanted to know if there is any way around this .

Im not sure what the reserve requirements are, but @Chris Mason and @Upen Patel are both lenders who would know.

On another note....dont use quickent loans.  High fees, high rates, low competency.  

I would look into why the HOA only has 9% in reserves. Did they recently have a major repair? What was it?
My first condo was about 35% funded when I bought it. A few years later we had a special assessment. You need to find out if they previously had money, but sooner it recently. And on what? What repairs are needed in the future and are they currently collecting and saving enough to build a larger reserve?

Thanks, @Russell Brazil .

Hi @Anthony Velez ,

Best answer you will get is by knocking on the doors of folks that recently purchased and asking them if they had problems getting financed, how much they put down, and what loan program they used.

HOAs are not consistent with how they answer questions and send paperwork over to lenders.

I live in SFL, and I'm surprised you were able to find a loan that only required 20% down for a condo! When we were looking it was 25% down, so we got stuck buying a SFH at 5% down. Also, I'm not surprised all the condo boards have less than 10% in reserves, no one wants to pay anything but the minimum maintenance fee down here. Another rule for many mortgages was more than 50% owner occupied - which is approximately zero buildings in south florida. Ok, I'm kidding, there are actually 12 buildings approved for FHA loans in Dade or Broward county...of 9300+ total buildings.

Not only that, but condos are significantly more expensive than SFH down here. The 1200 sqft 2br condo I rent would be 600k-700k to buy, plus 1k a month maintenance, a 2k sqft SFH of comparable quality/area is 400k-500k, no maintenance fee, insurance only $100 more per month. The condo will be 25% down (if you can find a mortgage), the house will be 5% down. 25% of 150k is the same as 5% of 750k.

Most condo deals down here are all cash - something like 56% of condo sales in Dade are.

Good luck and let me know if you find something.

Thanks @Russell Brazil

@Anthony Velez If the condo financials don't look good, then the only way around is a streamline condo review. This can easily be done and the min down is 10% (NOT 20%). As Russell suggested, find a good lender that knows their stuff, not Quicken and other like them who are just call centers and only know how to check boxes.

Thank you all for taking out the time to reply to this tread . @Russell Brazil and @Upen Patel I'm going to take you guys advise and find another lender . Hopefully I can find a good lender that I can get a bit more of money and I can purchase a SFH like @Stuart M. said and I won't have to worry about the reserves . One more question how would I determined if I'm actually dealing with a lender who knows what he/she is doing . Like with QL I actually thought they were good till I had and issue were I already sign contract with seller and agreed on a closing date , and two weeks before they called and said , the HOA did not have the 10% in the reserves . When I called the receptionist of the condo she said they have the funds they just dont have it the way the lender wanted it on paper . I guess its like @Chris Mason said they prob delayed with the respond to the paper work . 

Originally posted by @Upen Patel :

Thanks @Russell Brazil

@Anthony Velez If the condo financials don't look good, then the only way around is a streamline condo review. This can easily be done and the min down is 10% (NOT 20%). As Russell suggested, find a good lender that knows their stuff, not Quicken and other like them who are just call centers and only know how to check boxes.

 But his post is about florida. Streamline is 75% in florida. Limited review in fannie is technically 75/15 i guess, so theres that. 

In either case down payments on condos down here are 2-5x as high as sfh. They DO NOT want owner occupants with mortgages. 

http://www.freddiemac.com/learn/pdfs/uw/condo.pdf

http://www.fanniemae.com/content/guide/selling/b4/2.2/04.html

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