Condo financing and why the building matters

What lenders examine

Reserve funding, meaning whether the association is setting money aside for the major repairs its own study anticipates.

Deferred maintenance and any structural findings, particularly where the building's age and height trigger a milestone inspection requirement.

Owner occupancy proportion, since a building dominated by rentals is treated as a different risk from one dominated by residents.

Delinquency, meaning what share of owners are behind on dues, which is a direct signal of the association's financial stability.

Insurance adequacy on the master policy, and any litigation, which depending on its nature can stop financing outright.

Single-entity ownership concentration, where one owner holds a large share of the units.

Why this changed in Florida

Following structural safety legislation, certain buildings must complete milestone inspections and fund reserves for structural components rather than waiving them.

Associations that had kept dues low by deferring both have faced a reckoning, arriving as higher fees, a special assessment, or both.

Lenders responded by scrutinizing exactly those items, so a building that has not completed its inspection or funded its reserves can find its units difficult to finance.

The effect on value is direct. A building only cash buyers can purchase in has a much smaller market than one anybody can finance.

Warrantable and non-warrantable

A building that meets the standard criteria is generally described as warrantable, and financing behaves normally.

One that does not is non-warrantable, which does not mean unfinanceable. Portfolio lenders and specialist products exist, generally with larger deposits and different pricing.

The distinction matters to resale as much as to purchase. Buying in a non-warrantable building means selling in one, to a smaller pool of buyers.

That is a reason to price it in rather than to avoid it automatically, particularly where the building has a clear plan to resolve whatever caused the classification.

What to ask before you offer

Has the building completed any required milestone or structural inspection, and what did it find.

What is the reserve funding level, and when was the last reserve study.

Is any special assessment pending, proposed, or under discussion.

What is the owner occupancy proportion and the delinquency rate, and is there any current litigation involving the association.

What does the master insurance policy cover, and what is its deductible.

Your lender can often say quickly whether a building is already known to them, which is the fastest possible answer.

Program differences

FHA generally requires project approval or qualification under single-unit review.

VA generally requires the project to appear on its approved list, with no simple single-unit alternative in most cases.

Conventional applies its own review, with a limited review available in some circumstances depending on deposit and occupancy.

Because each program draws the line differently, a building that fails one may pass another, which is worth checking before abandoning a property you like.

Reading it as a buyer rather than a borrower

A financing obstacle is usually a signal about the asset rather than a paperwork problem. Lenders are conservative, and what worries them is often what should worry an owner.

A building with funded reserves, completed inspections and no litigation is easier to finance, easier to insure and easier to sell, and it is worth paying for.

A building with problems is not automatically a bad purchase, but it should be priced as what it is: a property with a known cost attached and a narrower future buyer pool.

The documents that answer all of this are the same ones the association must provide. Reading them during the inspection period is the whole of the work.

Getting the documents out of the association

The most common cause of delay in a condo purchase is not the lender. It is waiting for the association to produce documents.

What is needed typically includes the budget, the reserve study, recent meeting minutes, the master insurance certificate, the governing documents and a completed questionnaire from the lender.

The questionnaire is frequently the bottleneck, because it must be completed by the association or its management company and they may charge for it and take their time.

Request everything on day one of the inspection period rather than after the inspection is complete. There is nothing anyone can do to accelerate it once it is late.

Where a management company is slow, escalating to a board member sometimes helps, and your agent is better placed to do that than you are.

Build a realistic period into the contract for this specifically, because it is outside both parties' control and it is the item most likely to force an extension.

Limited review, and when it applies

Conventional lending offers a limited review for some condo purchases, which examines fewer aspects of the association than a full review does.

Eligibility generally depends on the deposit size and whether the property is a primary residence, so a buyer putting more down on a home they will live in has an easier path than an investor putting less down.

Certain conditions disqualify a building from limited review regardless, including some litigation and known structural issues, so it is not a way around a real problem.

Where a building qualifies for limited review, the process is faster and fewer association documents are required, which matters given how often documents are the bottleneck.

Ask your lender early whether limited review is available for your situation, because it can change the realistic closing timeline substantially.

It is not available on every program, and government-backed programs handle condo approval through their own mechanisms rather than through this one.

Newly built and newly converted buildings

A building still being sold by its developer is treated differently from an established one, because the association is not yet controlled by owners and the financial history does not exist.

Lenders generally look at how much of the building has sold and closed, how much the developer still owns, and whether the budget is realistic rather than introductory.

Introductory budgets are the recurring issue. A developer setting low initial dues produces a fee that rises once owners take control and the real costs appear.

Conversions, meaning a rental building sold as condominiums, carry their own considerations because the building's age and condition are separate from the newness of the association.

Ask what the budget assumes and whether a reserve study has been done, since a new building still has a roof and mechanical systems with finite lives.

Pre-construction purchases add a further layer, since the deposit is committed long before financing is arranged and the terms available at closing are not the terms available today.