Florida condo financing, explained in a few minutes.

Let me tell you a quick story. A client calls saying their building is not qualified and they can no longer close. I look at the building, and there hasn't been a financed closing in that building in over six months, which is normally a bad sign. We do some digging, and there's litigation on the building, which is keeping most lenders from qualifying the building itself.

We look at the borrower's profile. The borrower is very strong: perfect credit, a lot of assets and a decent down payment. Then we take a deeper dive into the litigation and what was truly happening in the building. Mainly, it was a unit owner who had litigation against the unit below, along with the HOA as a whole. That made the whole building non-warrantable under Fannie Mae and Freddie Mac guidelines.

What we did is, we have a portfolio loan that knows the building and knows the litigation. We looked at it and said, this is not a risk to our borrower, and the building itself is in great shape. We closed the loan in two weeks, and to this day we're still the only financed deal in that building.

So what does "doesn't qualify" mean? It means you're falling outside the box of Fannie Mae and Freddie Mac guidelines. It doesn't mean that you, as a borrower, are not a good borrower. Many lenders look only at the building and ignore the borrower's profile, and that's where many drop the ball. We do a deep dive on both the building itself and the borrower, and give better results than most.

The first three questions you should ask when you get that call: One, which item failed the building? Two, was it actually the building, or was it your profile? And three, is it in writing?

Then check your financing contingency. In Florida, this is very, very important. If you pass your financing contingency, they don't care if the building doesn't qualify or you don't qualify. You could lose all of your earnest money. So talk to your agent and make sure the date is in writing. If we need an extension to that contingency, we'll get that right away for you, to allow more time for us to underwrite your file.

What do you send us about the building? Easy. Send us the building name, your sales contract and any reason the other lender gave for denying you. We'll take it from there. Click the links below, and I'll talk to you soon.

Non-warrantable sounds scary. It isn't. Here's what it means in plain English.

Warrantable means the building meets the Fannie Mae and Freddie Mac guidelines. Non-warrantable means it doesn't. The most common reasons a building becomes non-warrantable are a lack of reserves, pending litigation in the building, high investor concentration of ownership, commercial space that is larger than some of the residential space, and hotel-style operations such as short-term rentals, which is big in South Florida.

I get calls all the time saying, hey, this building is in great shape, it's well run, it has reserves. But keep in mind, a well-run building doesn't mean it's a warrantable building. Many lenders only have programs they sell off to investors such as Fannie Mae and Freddie Mac. In the non-warrantable space, you need portfolio programs, or programs that understand the building is non-warrantable, to be able to close in that building.

So what changes if your building is not warrantable? You're going to need to put down a larger down payment. There's no 3 or 5% down financing for non-warrantable condos.

Not sure if your building is warrantable? Send us the name and we'll check it out for you.

Front desk, daily rentals, a hotel program. If this is your building, many loans will not touch it, but here's what will.

So what is a condo hotel? Condo hotels are buildings that generally allow short-term rentals. They could be condos that have been converted to hotels, or hotels converted to condos. In any event, those buildings allow a renter to come in right away, which is unusual for condos. Generally, they'll have a front desk that will rent the units for you.

This causes complications for many lenders. They want the option to sell the unit without having to go through someone's rental desk. That's the biggest rub with most lending. Many of the buildings viewed as condo hotels also have small units, and small units are hard to finance. Generally, anything below 400 square feet is very hard to finance, because many of them might not have full kitchens.

So what do you do if you're buying in a condo hotel? One, let's get the square footage, and see how many studios, one-bedrooms and two-bedrooms the building has. Square footage is key. Two, we want to make sure the unit has a full kitchen. That means a stove and a refrigerator. It doesn't have to be a four-burner stove, but there has to be something there for you to cook on. If it's just a bed and a refrigerator like a hotel room, that's going to be very hard to finance.

Things to ask if you're buying in these buildings: One, ask if there's a rental program and if there's furniture you must buy. These can be large fees you need to be prepared for, because you might not be able to put your own furniture in your unit. Two, ask if there are any rental restrictions. Can you occupy the property as a primary residence? If you can, great. If you can't, it will only work as an investment property or a second home. These are restrictions you need to be aware of up front.

Looking to buy a condo hotel? Send us the building name and we'll let you know what financing options are available.

The HOA is in a lawsuit, and your lender says no. That's not always the final answer.

So why do lenders get nervous when there's pending litigation? Pending litigation is the biggest reason we see condo loans get denied. If there's pending litigation in your building, the lender wants to know what the litigation is about. They don't want damages that you might be responsible for after you buy the unit. If the building gets sued and loses, and there's a large bill the building has to pay, they're going to send that bill out to all of the unit owners. That could be a cost the owners weren't prepared for.

Types of litigation we see: the HOA suing the developer, the insurance company suing the HOA or vice versa, or a slip-and-fall case. In any event, many lenders shy away from litigation as soon as they see it.

We have portfolio programs that will ask what the litigation is about, to understand the risk to us and to the borrower. If we have a strong borrower, and the case is just against a couple of unit owners, or it's an insurance matter that looks to be resolved and is in the final stages of court, we are willing to take a risk on that borrower and get them closed.

So send us the litigation summary for your building. We'll review it and let you know if there are any possibilities.