How To Get Financing On A Miami Condo
How to get financing on a Miami Condo is one of the biggest questions that many of our buyers have when it comes to purchasing real estate in our city. It's also one of the biggest misunderstandings when it comes to buying real estate in our city. The most important thing I can tell you about financing a condo in Florida is that it is NOT the same as financing in other places.
And if you have anyone telling you anything different, they are either (a) washing over the challenges as to not discourage you from buying, (b) not being honest with you or (c) inexperienced.
Why am I so hard on this topic?
Because I care about my buyers, and if you go under contract with an unqualified lender, you can risk losing thousands of dollars, your time and your sanity! I also want to do a good job for my buyers, and if I don't prepare you in advance, we can spend time looking at properties which you cannot buy. The good news is if you want to finance a condo purchase in Miami, it's not impossible. However, it is important that you know what to expect.
What you need to know about financing a Miami condo.
Financing a condominium and a single family home are two different experiences. When financing a condo, there is a business element of how the building manages their business, and the underwriters care a lot about this. I have been told from local lenders that they put as much weight on this as they do on the borrowers qualifications.
So even if you qualify for the loan and the building does not, You cannot get financing.
Some of the qualification and down payments depend on how you are going to use the property. For instance is it going to be your primary residence, a second home or an investment property? These details matter and also determine eligibility.
It's important to use a lender who is experienced in our market. It's important that they know our buildings, what to expect and how to mitigate issues in advance. Sometimes unqualified lenders will qualify the borrower and leave the condo qualification to the last minute. When in fact this is one of the most important reasons loans are denied here. If a lender issues a commitment letter without fully approving the building, you risk losing your deposit.
What else can you risk by using someone who is not experienced? Money and time. Once you go under contract, you are going to spend money on deposits, inspections, building fees, appraisal fees and more. If you go under contract with an inexperienced lender, you can risk losing all of this, plus time.
How do I know which buildings are eligible? This is the most annoying part. There is no master list. An enormous amount of the bank's rules revolves around the building's business which changes from month to month. So one month the building can be eligible, the next month not. One thing we do for our buyers is a deep research in advance to see if the building recently closed any financing deals and we also ask the property manager if they know if the building is eligible. You can also order a condo questionnaire, and see if there are any red flags. Your bank will ultimately determine the eligibility once you are under contract by requesting a certified condo questionnaire from the property manager.
Don't start shopping before you know what you can buy. Shopping without knowing what you can buy, is a waste of time. You need to know what type of loan product your lender is willing to give you on a condo and what are their requirements around this product. Maybe you can afford to put down 25%, but your lender requires 35%. Do you want to put down 35%?
What about preconstruction properties? This one is a biggie! Most preconstruction properties require cash deposits due at certain periods throughout the building phase. If you don't pay them as requested in the contract, you risk losing your deposit. Most preconstruction property contracts do not have financing contingencies built into them, so if you cannot get financing when it's time to close, you need to pay cash to settle. If you don't, you risk losing your deposit. Now that's not to say that financing will not be available for some of these projects at the closing time, but I wouldn't risk it if you cannot afford to close with cash.
Well, this sounds horrible! Can I even get financing on a Miami condo?
Don't worry; it's not all bad, and we have buyers get financing on condos each and every year. The most important takeaways are these:
- Financing is possible on condos in our city, but you need to know (a) the type of product you are qualified for and (b) the building's potential eligibility.
- Work with a lender who is experienced in closing financing deals on condos in our area.
- Work with an experienced real estate team who can best guide you and protect you during the transaction.
- Also, if you need financing, do yourself a favor and don't make offers without a financing contingency in your contract.
The good news is since lending restrictions are strict, it makes our market more stable than in the past. So this is good for owners in the future stability of the market. If you have more questions about how to get financing on a Miami Condo, give us a call or email us. We are always happy to direct you to qualified, experienced vendors.