Can I obtain a mortgage on a Florida condo?

Many homeowners obtain a mortgage each year on properties including condos in Florida. While obtaining a mortgage on a home or townhome can be more straightforward, a mortgage can be obtained for a Florida apartment, also referred to as a condo.

In Florida, there are many types of buildings. There are new, luxury high rise buildings along the beach. There are older buildings as well. There are condos located within a master association where the building is one of several buildings that share amenities such as a pool, gym or other common areas.

The rules for obtaining a mortgage on a Florida condo have changed over the years. Before the financial crisis, one could purchase with a condo with 10% down if they had good credit.

Now, it often requires more, but depends on different factors.

If the building has sufficient reserves (i.e. 10% of the budget), then you may be able to purchase with a 10% down payment on a primary residence. If the building does not have sufficient reserves, which is common with Florida condos, then you will typically need at least 25% down payment for a primary residence.

When purchasing a Florida condo, underwriting will typically need to review the condo questionnaire. This is a document that requests certain information from the condo association. Some of the questions on the questionnaire could include:

a) How many owners vs rents are there in the building?

b) Does the association have any litigation?

c) Has any structural damage been found in the building?

d) Is there any current renovation going on in the building?

e) Is there a majority owner in the association (i.e. an individual or entity who owns 51% of the building)?

The above are some examples of information that underwriting could request from the association to analyze the risk involved in the building.

If the building has reserves, that's already a good sign. For example, if the building collects $500 per month for each owner, that would be $6000 in annual HOA dues per unit. If there are 200 units in the building, that would be $1,200,000 in annual dues. Ideally, there is at least 10%, or $120,000 in a bank account for the condo association's reserves. When such an example is present, this typically means the association is in good financial shape. Buyers looking to purchase a condo in the building will be more likely to be able to finance 90% of the purchase, meaning they only have to put 10% down for a primary residence.

Keep in mind, that if the building does not have sufficient reserves, then buyers will be more likely to need a 25% down payment for a primary residence.

If the property is a second home or an investment property, then the condo purchase will most likely require 30% down if the reserves are not met.