Orlando Mortgage Blog

Lemons to lemonade. I need to start out by confessing that even I have been hesitant to get a call on a condominium some days in the last couple years. Why you might ask? Well Florida has experienced one of the worst condo markets in the country for any number of reasons in that time.

If you can fog a mirror you already know the woes of the real estate bubble. Due to the tremendous sales price escalation seen in the market in the 05 through 07 time frame when buyers virtually stampeded to make that best offer before the price went up again, the market reached such high price levels so fast that entry level buyers and traditional investors in it to rent it, quickly found themselves priced out of the market on a typical single family residence and quickly moved to the lowest cost point which of course was the condo market. It wasn't long before speculation by "flippers" soon jockeyed prices up on this entry level market as well. So, even here in the Orlando area, unlike many coastal areas in South Florida and the panhandle, which had always been primary markets for this property type due to popularity with the typical retiree or vacation home owner and had similar issues, Central Florida generally had smaller, lower priced units, apartment conversions and low rise complexes overall. So the $40k to $60k unit got jacked up to $80k, $100k and more. That upward climb was really no different than a single family home with one major exception. Whatever happens in a condo complex rapidly effects the others since they are compared heavily to that complex on an appraisal...it's a fish bowl. 

So the problems with declining values swept thru pretty fast. The high numbers of second home and let's be honest "investor/speculator" types that wanted to sell when they started falling started a fire sale mentality in many projects tanking values in a true downward spiral. Many owners walked away and complexes found themselves budget short on dues leaving the folks who didn't bail holding the bag for those costs too. Private mortgage insurance companies (PMI) suffered such high losses that they refused to write a policy on a new condo mortgage, which forced lenders to back down to 80% financing or lower and in many a case stop lending on condos at all in this market.

Much more to it of course, but...trouble to one person is opportunity to the next one. So I ask myself what information I had that I could pass on to a perspective buyer or realtor to get this moving again. Here are a few factual suggestions for you:

• Conventional Financing  Unless the existing project is currently approved by Fannie, Freddie or a specific lender that has reviewed the project and approved it for lending at 80% financing, you will be limited to Owner-Occupied or Second Home financing using the very popular Streamline Project Review which requires 75% financing or below. The Streamline Review will require 90% of the units to be sold, the association to have been turned over to the unit owners and that a minimum of 51% of all units are Owner Occupied or Second home, no more than 49% investor. Your realtor or a member of the project association will be able to answer that for you. PMI is currently not available on a condo in Florida therefore the 80% limit, but always subject to change with market conditions.
• FHA/HUD Financing  Requires that the condo project be currently approved by HUD (call us to determine if your Realtor® doesn't know). A case # cannot be issued if it is not, therefore no loan is capable, with the exception of the situation of the FHA/HUD REO (Real Estate Owned) condo unit. This means that HUD has taken the property back in foreclosure or deed in lieu of. If they own it the project does not have to be FHA/HUD approved (they own it, the risk is already there and they want to move it). Any other seller must deal with an approved project only. The REO purchase is a great opportunity to take it all the way up to 96.5% financing on a primary residence without project approval. Ask your Realtor® to help locate these in your market.
• VA Financing (Veterans Administration) Basically the project needs to be VA approved for VA financing (call us to determine this if your Realtor® doesn't know). Then if it is an approved project the vet may finance up to 100% of the price or value whichever is lower subject to their available eligibility which we can help determine as well, plus the one-time VA funding fee can be added on top as well.
• HomePath Program  This program offers Fannie Mae owned properties for sale including condo's without project approval of any kind up to 97% Owner-Occupied buyer financing and 90% Second Home or Investor buyers. Condo's are eligible at these LTV levels folks. You must receive a Fannie Mae DU approval letter (we can run it for you) before a Realtor® can present your offer. Other advantages are expanded credit guidelines and no PMI reqiuirement. And NO APPRAISAL is required. Fannie Mae owns the property and uses the sales price in lieu of an appraisal. So use some caution in your evaluation of the purchase. A lender has to reject the loan if an appraisal is provided to them. Go to www.HomePath.com to review properties in the area you are looking to buy in today to look for for properties shown as HomePath eligible. You can click on the HomePath button in the left column to find much information right here, right now.

So whether you are a first or last time buyer, second home buyer or investor there are still many options open to today's condo shopper. These properties are available on a first come basis. And I ask you, when will we see better values in the market?