Is it hard to get a mortgage for a condo in Florida?

[HauseitAdmin]

This is a topic that we frequently get asked about, especially by New Yorkers and Bay Area transplants new to Miami and South Florida. The answer is yes, depending on which lenders you ask and what type of condo buildings you're looking at.

New construction condo buildings in Florida tend to have Chapter 558 claims against the developer. This can sound scary when they use words like construction defect litigation, but it's important for you to further diligence how serious the claims are. It could be simply an opportunity for the HoA to sue the developer for more funds before any sort of warranty period runs out, or it could be for something more serious (i.e. a hazardous, serious construction defect). Only you can make this determination for yourself.

Please check out the comments section in the article linked below, where you'll find a healthy discussion re: Chapter 558 claims in Florida.

From what we've seen, many major banks headquartered in New York may be uncomfortable or unfamiliar financing in Florida, where litigation is much more common in buildings. In New York, litigation is typically seen as a red flag when it comes to financing decisions. As a result, you may have real estate agents pushing you to use obscure mortgage brokers who can find you a small, hard asset lender at high interest rates. Don't fall for it. Do your own diligence and ask the lenders you want whether they can finance in a particular building. The best is if they've done a deal in the building within the last 12 months, and especially helpful if they've done a deal after the litigation has been filed.

[aslan]

I recently did a deal in the One Paraiso building, and will tell you that at the beginning, pretty much everyone was telling us that it was pretty much impossible to get traditional financing at normal rates due to the Chapter 558 litigation. I was steered towards random, small mortgage brokers I've never heard of who sourced small, opaque direct lenders offering me rates at over 4% when Wells Fargo offered me 2.5%.

These mortgage brokers kept hounding me, saying that Wells Fargo or any big bank won't touch it because of the litigation, and that they'll back out at the last minute. Fortunately, I didn't listen to them even though they were right about another big bank which I won't mention (starts with a C). I kind of tune people out once they start sounding like a used car salesman with high pressure tactics.

What got me comfortable with Wells? I was able to confirm with them that they recently closed a deal in the building in July that was "streamline approved." This was ~8 months after the Chapter 558 litigation had been filed, so that meant the building was still approved after that happened.

In any case, we are the latest comp, and I can tell you that we closed with a 2.5% 10 year ARM. Best of all, they extended our rate lock for free even though interest rates had gone up when our closing was delayed.

P.S. How did I get comfortable with the litigation itself? Well, after doing some research and talking with folks here, I learned that every new construction building has to do this Chapter 558 inspection (very thorough by an inspector that looks over the entire building) when the condo board takes over from the developer. Invariably, the inspector will find issues to report on, which the condo boards invariably sue the developers for. The key is to look over the report, decide for yourself if it's serious, and ideally talk to the building engineer. Eddy the building engineer met us during an early showing, and he made me comfortable. It sounded like they already fixed anything serious, saved receipts to hopefully get reimbursed, and there wasn't any serious danger. Again, do your own diligence, this was just my experience and you shouldn't rely on it. Not financial or legal etc advice :-)