A Buyers Guide to Condo Questionnaires in Florida

A Buyers Guide to Condo Questionnaires in Florida

Financing a condo purchase in South Florida can be quite a hassle because of restrictive owner tenancy and loan-to-value ratio criteria set by lenders. The process steps are quite extensive and often subject to change, leaving buyers feeling lost and frustrated.

One of the biggest problems one may come across when applying for condo financing in Florida is the mandatory condo questionnaire. This particular questionnaire is proof that the condominium building complies with the lender’s underwriting standards as a whole. If filled correctly, the questionnaire entices the lender to hand you your new condo. On the other hand, if you mess the questionnaire up, the lender might not consider you an ideal fit and halt the process altogether.

The entire application process may seem quite complicated if you do not have enough information to begin with. So, to ensure that your journey goes on smoothly, you should be aware of the condo questionnaire, its contents, and what factors might put your application at risk. Keep on reading further to educate yourself about the document if you are opting for condominium financing in South Florida.

What Is A Condo Questionnaire?

The universal condominium questionnaire was developed by Freddie Mac and Fannie Mae to alleviate the load on community groups that consistently send condominium project information to mortgage lenders.

 A condo questionnaire is issued by the lender to a condo development when a prospective buyer applies for condo financing. The questionnaire lets the lender evaluate whether the condo fits the loan conditions. This is the paperwork that lenders require to fund a townhouse or condominium that is part of a homeowner’s association. Lenders use the document to evaluate homeowners’ association’s capabilities and decide whether it is worth the investment.

Furthermore, it provides a means of acquiring important information about the stability of your potential real estate investment as well as a future house.

How Does The Condo Questionnaire Work?

Condominium apartments are considered riskier investments by lenders than single-family homes since the physical and financial well-being of the entire development influences the unit’s value. If other residents fall behind on their association fees, the community’s financial stability suffers as a whole.

Similarly, if a substantial fraction of non-occupant owners rent out their apartments without maintaining them, the physical state of the community suffers. As a result, association managers or HOAs are expected to fill out the form at a lender’s request. Moreover, the questionnaire provides information on whether development is justified.

Previously, lenders used to create condominium questionnaires, but that changed in 2016. Freddie Mac and Fannie Mae implemented standardized questionnaires, which streamlined and ensured uniformity in the evaluation process.

What Does A Condo Questionnaire Contain?

There is no standard questionnaire utilized in the market because each lender has their own, tailored to their individual needs. Regardless of the exact order or structure of the inquiries, all lenders want to make sure the condo fits the requirements. A typical condo questionnaire will inquire about:

  1. Basic project information: Facts such as the legal name of the project and information on the homeowner association. The questionnaire also inquires about the presence of features and limits such as supportive care for seniors and resale or deed restrictions in the building.
  1. Finances: Whether the mortgagee is required to cover overdue common expenses, whether the HOA is involved in current litigation, and so on.
  1. Non-residential condo use, as well as whether any condo residents own several units.
  1. Project completion: Project status issues include whether the project is completely finished and how many units have been sold and closed.
  1. Projects that have recently been converted or rehabilitated: This section is optional if the project was converted into a condo from a former apartment building, hotel, or office.
  2. Liabilities and HOA finance protections are covered by insurance and financial controls. The bank, for example, wants to know whether the building is in a flood zone and whether “proper access controls are in place” for each HOA account.

In terms of Fannie Mae, the following are some of the reasons that cause your condo loan to be reviewed:

  1. Whether your condo is your primary residence or a secondary residence
  2. If your condo is detached or attached
  3. Location of the condominium
  4. Loan-to-Value ratio (LTV):  Essentially, how much of the entire value of the condo will be paid off with the first mortgage lien.
  5. CLETV (Combined Loan-to-Value ratio): This includes all of your mortgage lines, not just your first.
  6. The HCLTV (High Combined Loan-to-Value ratio): The HCLTV covers both the credit you are utilizing in the present and the credit you could utilize if you wanted to.

The complete form includes an additional item on newly converted or repaired projects. This question inquires whether the project was transformed into a condo from a former apartment complex, lodge, or workplace. If the lender feels this is the case, they will want to send the entire form to find answers to research the conversion.

How Much Does A Condo Questionnaire Cost In Florida?

A condo questionnaire typically costs between $250 and $300, and the fees must be paid by the borrower. If the condo HOA does not utilize a management business or is unable to complete the questionnaire on its own, you should pay a fee to the management company or a third-party agency selected by your lender.

For established projects, the expedited PERS submission process needs the Condominium Project Questionnaire (Form 1076) or a fundamentally identical form to have been completed within the previous 180 days.

Now how much down payment for a condo in Florida?

Florida Condo Down Payment Requirements

When purchasing a condo, one of the most frequently asked questions by buyers is how much down payment is required. In Florida, this works in favor of the buyer since Fannie Mae and Freddie Mac have fixed flexible first payments for the borrowers, which are:

  • For first-time homebuyers, a 3% down payment is required.
  • FHA Condo Loans require a 3.5 percent down payment.
  • Non-first-time home buyers must make a 5% down payment.
  • 10% down payment on Second Home Condo Loans.
  • Jumbo condo loans require a 10% down payment.
  • An investment property condo loan requires a 20% down payment.

Another exciting news is that the lowest loan amount is fixed at $150,000, while the maximum loan limit has now increased to $647,200 in 2022 for condos, making it easier for buyers to purchase the condo of their dreams.

What Are The Factors That Can Lead To The Rejection Of Your Condo Questionnaire?

The different standards of different lenders may lead your loan to be denied. However, you can reach out to other lenders in this scenario and prequalify with them.

Another thing that may prevent you from obtaining condo financing is HOA approval. The Condo rules in Florida provide HOAs a lot of flexibility in accepting or denying potential buyers and renters. While organizations may use screening to exclude buyers and renters, the choice cannot be discriminatory or violate the Fair Housing Act.

However, your condo financing loan application might not be approved if:

  • The condominium construction project is not completely finished.
  • The property also serves as a hotel.
  • The property serves as a form of investment security.
  • The property is cooperative.
  • The property is liquid investment security with the Securities and Exchange Commission (SEC).
  • The developer owns the project facilities, which may be leased to another party by the homeowners’ association (HOA).

In addition, since January 1, 2022, Fannie Mae no longer approved loans for condo units in buildings where major repairs had been postponed or where the condo association had been forced by local authorities to rectify unsafe conditions. Following the same concept, Freddie Mac issued similar rules on February 28.

The Bottom Line: Is The Hassle Worth It?

The process of getting condo financing in Florida can take from 45 to 60 days from the day of application to a completely done deal of loan financing. This might seem pretty long, but it is definitely worth the wait.

Condos are extremely enticing because of the numerous benefits that come with purchasing one. You will have access to a swimming pool, tennis courts, and lively bars in a completely secure atmosphere with a guard on duty at all times. They are in the most popular and rapidly developing districts, where you can simply walk around and take advantage of many attractions.

What’s more is that you won’t have to face much hassle for maintenance or home improvement tasks, as the majority of condos have government boards ( such as HOA) that look over all these works. And the most important factor, condos are frequently less expensive than comparable single-family or multifamily residences. One can also build equity and often take advantage of tax deductions on the mortgage interest.

These never-ending benefits persuade people to apply for condo financing in Florida. Who doesn’t want to live rent-free and comfortably in their own space with so many added benefits?