Our client, who recently moved with his family from New York to South Florida went under contract with the developer to purchase a newly constructed condominium in a high-rise luxury building in Sunny Isles Beach, Florida for $2.5 million.
Although he had an excellent credit score, a low debt-to-income ratio, and was able to show full documentation of income through 2 years of tax returns, our client faced a huge challenge.
The condominium association had zero reserves in its budget.
And, control of the association had yet to be turned over from the developer to the unit owners.
Also, the association’s bylaws contained language limiting the lender’s ability to resell the property in the event of a foreclosure.
In other words, our client was under contract to purchase what’s known as a “non-warrantable condo.”
The financial health and status of the condominium association – especially the lack of any reserves – made the deal very risky for most banks and lenders. Traditional lenders typically require the association to have a healthy level of reserves in their budget in case repairs or other big expenditures arise.
Despite those issues, we obtained an 80% loan-to-value (LTV), 30-year fixed jumbo loan. We successfully closed the $2 million loan for our client, with time to spare before the closing deadline.
Because there is no prepayment penalty, our client will be able to refinance to a lower interest rate once the condo association issues are remedied.
Your profile as a borrower (credit score, debt-to-income ratio, ability to show income through tax returns) is just one half of the puzzle.
The other half is the soundness of the collateral (i.e., the subject property) itself. In the case of condos, lenders must be satisfied that the condo association is in good financial health.
Need a loan to purchase or refinance a non-warrantable condo? We have the expertise to help.
