2 min Tuesday: 3 Major Condo Issues We Must Navigate In 2024

As property prices continue to rise in South Florida, more first-time home buyers will be looking to purchase condos with a low down payment. In this week's 2-minute Tuesday, we will cover the three major challenges we are experiencing in the South Florida condo market and the currently available solutions.


Inadequate Reserves

A lack of projects collecting at least 10% of reserves or their assessment income in the annual budget remains the most popular reason condos are not eligible for a low down payment. However, I have heard of some legislation in place at the beginning of 2025 that will require all condo projects in Florida to collect at least 10% in reserves.

  • Currently, 50% - 60% of condo projects do not collect the minimum 10% reserves required by Fannie Mae, Freddie Mac, FHA, and VA to make a project eligible for approval.
  • When purchasing a primary residence, the minimum down payment required is 10% of the purchase price when a buyer has at least a 680 credit and a debt-to-income ratio of 45% or less.
  • Second homes and investment properties require a minimum down payment of 25% - 30% when a project does not qualify for the full review process.
  • This is specific to Conventional loans.


Assessments For Major Repairs

Since the collapse of the Surfside building in 2021, legislation has been passed to ensure that HOAs meet the requirements to maintain a project's structural integrity. This legislation has obligated many projects to do major repairs to pass milestone inspections required by law.

  • Assessments for major repairs are the most common reason a condominium may be deemed non-warrantable.
  • Major repairs are considered anything related to the project's concrete, rebar, structural integrity, or safety.
  • This can disqualify the project from Conventional financing altogether, leaving only Non-QM financing as a viable option.


More than 5% Deductible In Master Insurance

This is now a new obstacle we have seen rise quickly in popularity, and it is probably tied to the obstacle mentioned above. South Florida faces a huge issue with condo project insurance, and a deductible of 5% is becoming unaffordable for many projects.

  • Disqualifies the project from Conventional financing altogether, leaving only Non-QM financing as a viable option.
  • This is caused by the rise in condo project policy premiums when opting for a low deductible, leaving some projects no option but to increase the deductible to 7% - 10%.
  • The issue is often discovered mid-way through the transaction when the condo questionnaire and master insurance policies are released to the lender.


We have extensive experience working with condos, and we're happy to assist you and your buyer in navigating the biggest obstacles in condo financing that our market presents.


Market Update: February 27, 2024

Make sure to see our market update video below or don't the right of this presentation, depending on the device you're using to view it.


Thanks,

Michael Ortiz

The Mortgage HUB

Share

Reviews

"Michel and his team provided an excellent service by facilitating a secure and efficient home financing process.They were responsive and transparent during the entire process. We found their user-friendly technology and data analytics reporting system very helpful. We highly recommend The Mortgage Hub!"

anabel pollan

"I can't put into words the level of care and attention Michael and his team had in me and my wife. I've been through multiple lenders/brokers already and there was always some unsurpassable issue. However the people at the mortgage hub did not give up on us. Michael, Eneris and Julie went above and beyond to make sure we qualified and were in good standards. They taught me more about buying and owning a property than I ever thought possible. Please excuse my mess of tangle thoughts and praises, but if you take one thing from this review is that this a team that has your best interest in mind. They want you to be happy and will have your back through the whole longgggggggggggg process. If you are in the fence about it, give it a shot and call Michael and his team. I promise you will not regret it."

dariel hernandez