Destin Florida, Sandestin Fl, 30A and PCB Condo Questions and Answers
What does the lender require from the HOA or Condominium manager?
All Lenders will require the HOA to fill out their condo questionnaire, there are two types Full (Long form for max financing) or short form (limited review) limited review does require on average for the borrower to put more money as down payment.
1. Lender Condo Questionaire
2. Copy of the Annual HOA Budget for the current year
An acceptable Budget will include the following:
• Line item expense for Reserve account, separate from the Operating account.
• Line item expense for the insurance premium and deductible
• The name of the HOA must be shown on the budget
3. Insurance Company Information:
Copy of the Condominium Project’s Certificate of Insurance for Property and Liability; Fidelity Bond Coverage (Employee Dishonesty), if over 20 units, and Flood Insurance, if applicable.
More lenders are requiring all pages of the policy for review.
4. Required Documentation for New Projects or New Conversions:
Copy of HOA’s Declarations (CC&Rs) that have been signed, stamped and filed.
Copy of all recorded addendums to the Declarations
Copy of HOA by-laws and addendums
A full review is required for max finacing with Fannie Mae and Freddie Mac backed loans this means loan can have smaller down payment and can be a 30 year fixed for primary, second and investment propeties. The loan amount is limited to a max 417k (soon to be 424K) 5% down as a primary and 10% down for second homes.
The guidelines of a full review are:
- 51 percent of units are owner occupied or second homes
- No single entity owns more than 10 percent
- Maximum commercial space is 20 percent
- No construction defect litigation. All other litigation will need to be reviewed.
- Budget–line item for reserve with at least 10 percent of assessments/income being collected
- No more than 15 percent of association dues delinquent more than 30 days
- Condominium rentals are not advertised with daily rentals or other hotel type amenities (minimum three-day rental period)
- Insurance coverage must be sufficient (hazard, flood, liability, fidelity and HO6 if required)
- Review of condo docs to address:
b. Limitations on ability to sell or first right of refusal
c. Amendments to docs
d. Rights of mortgagees and guarantors
e. First mortgagees rights
f. Unpaid dues
g. Minimum square footage of unit is 400 square feet
Limited and full project reviews have duration of 180 days.
A limited review is conducted by the lender – it’s just a questionnaire that’s completed by the property manager or head of the homeowner’s association. To be eligible for a limited review, you must put down at least 20 percent for a primary residence or 30 percent down for a second home. Has the same loan amount limits as above.
Limited review criteria are:
- Commercial space can comprise no more than 25 percent of the square footage
- At least 10 percent of association dues must be allocated to reserves
- Fewer than 15 percent of units must be in arrears with their dues
- More than half of the units must be owner-occupied
- Insurance must meet GSE guidelines
- There can be no lawsuits over safety, structural soundness, habitability or functional use
- No single entity can own more than 10 percent of the units unless there are five to 20 units; in that case, a single entity can own two units
- Minimum square footage per unit is 400 square feet
- Condominium rentals are not advertised with daily rentals or other hotel type amenities.