I read a startling comment today from a Florida lender who said that in South Florida, "less than 10% of loans submitted for full condo review will receive condo approval & close." I've seen my share of rejected condo loans but that number surprised me. Those applying for a condo mortgage will hear about the condo questionnaire but may not fully appreciate the root canal that getting one completed can be. Florida conventional condo mortgages have their own separate qualifying guidelines that are set by Fannie Mae and Freddie Mac and the initial steps in getting a condo loan approval includes having the condo association complete the dreaded condo questionnaire. There are two forms of this document depending on the amount of down payment being made, full condo review as mentioned in the opening sentence and the limited review which a higher down payment can allow. To qualify for a limited review, the unit must be purchased as a primary residence or 2nd home and typically requires 30% down payment although there are ways around this. Investor units do not qualify for limited review. Things that matter and can lead to a loan denial with a a full review that don't matter with a limited review are association financials including reserves, percentage of owner residents and percentage of units past due among other things.
The reviews have always been quite thorough and, earlier this year, became even more so with the addition of questions about building condition and existence of safety concerns. The vague nature of the new questions has led to some associations refusing to complete questionnaires for fear of exposing themselves to liability. There are questions that start with "Is the association aware of..." and "Is it anticipated that...". I can understand the reluctance to sign one's name to a question like this. Here is a more in-depth look at this growing trend of refusing to complete the questionnaire from the Orange County Register (CA). There are a few associations in our market that already refuse to fill out the questionnaire effectively making the units there cash-only.
Buyers hoping to buy a Florida condo who plan to use a mortgage to purchase need to discuss with their buyer's agent their down payment percentage and whether the purchase is for residence or investment so the agent can avoid units in buildings that won't be able to satisfy the underwriters. Becoming familiar with the requirements on the Florida condo full review will help educate buyers and agents alike about what criteria are critical to approval. Here's a copy of the Fannie Mae full review questionnaire that a buyer's lender is going to want answered by the association. Save a lot of time and effort by avoiding condos that can't satisfactorily answer these questions or be prepared to put 30% down to downgrade to the limited review or pay cash.
"A debate between an expert and a crank does nothing other than elevate the crank." _Mehdi Hasan
