Let Walton Funding Show You the Expertise We’ve Developed in Condo Lending

Some people believe the only thing more spectacular than buying a home on 30A is buying a condo on 30A – one that offers many perks that a home does not.

No grass to mow. Usually lower cost. A feeling of community with neighbors. On-site amenities in common areas.

Whether your favorite part of South Walton is WaterColor, Seagrove, Seacrest, Rosemary Beach, Seaside or Blue Mountain Beach, condominium living boasts many advantages over buying a single-family home. Of course, if you’re drawing up a list of pros and cons, there are also negatives to consider, such as having to pay homeowner association dues and assessments that can pop up unexpectedly to cover a development’s sudden needs, like exterior painting or a new pump for the pool.

It also can be harder to obtain financing for a condo than a stand-alone home. Guarantors impose tighter standards on condo loan borrowers that go beyond the applicant’s credit and income. They also want to make sure the condo development itself is on solid financial footing, which depends partly on the behavior of others living there.

But Walton Funding will help you cross financing difficulty off your condo buying “con” list. We have mastered four types of condominium loans:

 

  1. Conforming – Government agencies Freddie Mac and Fannie Mae back these loans because they meet a set of standards that include:
    • Construction of the condo development is complete.
    • The developer doesn’t own more than 10 percent of the units.
    • Residents control the homeowners association.
    • No manufactured homes in the complex.
    • At least half of the units are owner-occupied, either as primary residences or second homes.
    • Not more than 15 percent of residents are more than 60 days delinquent on their homeowner association assessments.
    • The development may not be involved in any pending litigation, either as a plaintiff or defendant.

We will write these loans with a down payment as low as 5 percent.

 

    1. Warrantable Jumbo – These are condos that conform to Freddie Mac and Fannie Mae guidelines but are valued at more than $417,000. We require 20 percent down on warrantable jumbo condo loans.

 

    1. Non-warrantable – We realize that not all condos will meet the federal lending guidelines, but that doesn’t mean they aren’t solid investments. We grant many such loans, funding them ourselves and requiring 25 percent down.

 

  1. Condotel – Another type of condo that doesn’t meet federal lending guidelines, but we will still issue loans for, are condotels, or “condo hotels.” These are condo developments that investor agencies determine are operating effectively as hotels. These agencies have a long list of criteria that meet the condotel definition, including hotel/motels that have been converted to condos, projects that include registration services or allow rental by the day, projects that restrict the owner’s ability to occupy the unit, or developments with agreements obligating the owner to rent out the unit on a season, monthly, weekly or daily basis.

Walton Funding requires just 25 percent down payment on condotel loans.

Wherever it is you’re looking, whether it’s Destin, Miramar Beach, or the beaches of South Walton, let us handle your condo financing needs.

 

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Jumbo Mortgages on 30A

South Walton’s Emerald Coast boasts some of Florida’s most elegant dream homes, and there’s a locally based firm that excels at helping clients realize those dreams.

The mortgage industry calls the loans needed to purchase these stunning properties, with values exceeding $417,000, “jumbo” mortgages, and at Walton Funding, we specialize in them.

Nationally, home buyers are increasingly turning to non-bank mortgage lenders like Walton Funding for their mortgage loan needs. In 2014, non-bank lenders made 47 percent of home-purchase loans and 42 percent of refinance loans, according to a recent Wall Street Journal report that cited Federal Reserve data. That was up from 43 percent and 31 percent, respectively, in 2013, and the biggest share of the market for non-banks since 1995, the Journal reported.

The 30A is no different, and playing a big role in Walton Funding’s growth has been our ability to perfect the issuance of jumbo mortgages.

Bank affiliated lenders, more limited in their options and forced to comply with more governmental regulations, often will pepper borrowers with follow-up questions, dragging out the closing process for weeks. At Walton Funding, where we focus strictly on mortgages and have the ability to bring multiple funding sources to our borrowers, we can process jumbo loans faster.

We offer adjustable rate jumbo mortgage loans with rates that are fixed for five, seven or 10 years before they adjust either up or down to reflect market conditions. These introductory rates are typically much lower than those found in fixed rate mortgages, and they increase with the length of the introductory rate period.

Because there is no way to predict which direction ARM rates will be go at adjustment, it’s best to choose an introductory rate period that matches the length of time you expect to hold the loan. But even if you plan to pay on the loan for its full term, and the rate rises on adjustment, your cumulative savings up to that point – from years of saving hundreds of dollars a month compared to a fixed rate payment — could offset the increase.

Our jumbo loans typically run from $417,000 up to $5 million, a price range that currently includes nearly 700 homes in Walton County. We’ll occasionally lend up to $10 million under the right conditions. We offer wholesale rates to qualified buyers, and buyers can pay as little as 10 percent down with pledged collateral programs. These programs are especially suitable for younger buyers who have high incomes, a solid work history and stellar credit, but haven’t saved much because they’ve invested heavily in their retirement or paid high rents.

So contact Walton Funding today and let us show you how easy securing a jumbo mortgage loan can be.

 

Let Walton Funding Help You Realize Your Emerald Coast Vacation Dream Home

There’s a place in the Northwest Florida panhandle where the beaches are as white as sugar and the Gulf of Mexico water is a deep turquoise, warm enough for swimming much of the year.

It’s called South Walton, also known affectionately as “The 30A” for the scenic highway that runs through it. It’s a gorgeous 26 mile stretch of beaches with 16 friendly beach neighborhoods, each with their own unique charm.

There are coastal dune lakes and maritime forests, a thriving seaside community, fabulous sport fishing, ample health care options and incredible restaurants.

So it’s not surprising that the area is becoming increasingly attractive to those looking to invest in a vacation home, as the number of people buying vacation homes rises nationally, especially in the South and in beach communities. In 2014, the most recent year for which statistics were available, vacation homes sales in the U.S. jumped to 1.13 million, according to the National Association of Realtors’ 2015 Investment and Vacation Home Buyers Survey.

That was more vacation homes sold than in any year since the organization started collecting the data in 2003. Their sales in 2014 nearly doubled the combined total from the previous two years, an astonishing level of growth.

“Affluent households have greatly benefitted from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” said Lawrence Yun, the NAR’s chief economist. “Furthermore, (2014’s) impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.”

More people are financing their vacation homes, taking advantage of mortgage interest rates that remain at near-historic lows. About 70 percent of vacation home buyers obtained mortgage loans, up from 62 percent in 2013.

Forty-six percent of vacation homes were bought in the South (up from 41 percent in 2013), compared to 25 percent in the West, 15 percent in the Northeast and 14 percent in the Midwest.

The survey found that forty percent bought in a beach area, 19 percent purchased in the country and 17 percent bought a vacation home in the mountains.

A third of buyers planned to use the home for vacations or a family retreat, 19 percent planned to make the home their primary home in the future, and 13 percent bought for potential price appreciation, the survey found.

Many vacation home buyers like to rent the home out when they aren’t living in it. In such cases, there are a few things to keep in mind.

Are you allowed? Before buying the home, make sure the condo or homeowner association, resort or city allows rentals.

Work the numbers. Determine how much time you want to spend in the home, and how much time you want to rent it out. Budget for taxes, advertising, property management if needed, and upkeep, such as a cleaning service in between tenants.

Come to Walton Funding. We specialize in helping real estate buyers in the South Walton area find unique and highly competitive financing solutions.

 

Ehrig House.JPG

Building Equity: Adjustable Rate Mortgages (ARMs)

In a low interest rate environment, many investors are inclined to consider a fixed rate mortgage.  In fact, according to the National Associate of Realtors, approximately 95% of people chose fixed rate loan in 2014.  Some homeowners may consider an Adjustable Rate Mortgage (ARM) may have its advantages.  An ARM, however, should not be used as a means to afford a larger home.  It can be a strategic tool to lower cost of capital, and perhaps build more equity in your property.

As a disclaimer, an adjustable rate mortgage should only be considered by experienced homebuyers who have a strong financial grasp of the complexities of an ARM.  Real estate investors that might consider an ARM might already have multiple properties and many times sufficient outside liquidity.  For more information on ARMs and how they work, you can look here.

In this example, we are examining the costs/benefits of $1,000,000 loan amount.  For the 30 year fixed rate we are assuming 4.0%.  For the ARM, we are assuming a 5/1 ARM that is currently 2.99%.  On a $1,000,000 loan:

  • 30 Year Fixed PMT = 4,774
  • 5/1 ARM PMT = $4,221

Equity

At the end of  year 5 it’s interesting to note that even with the lower payment, the 5/1 ARM has a lower principal balance.  The principal balance of the ARM is $888,901 vs. $904,475, or about $15,000 in additional equity.  Consider an additional payment to the 5/1 ARM as if you had financed a 30 year fixed ($563 per month) and you now have a principal balance of $852,514 vs 904,475, or about $52,000 in addition equity.  This can also be helpful in reducing payment shock below.

Payment Shock

As of Aug 13, 2015, the current 1 year LIBOR is .84.  Most ARM rates adjust by a margin of 2.25%.  For the purpose of the exercise, it is  assumed that ARM rate increases 2.00 bps over current the next 5 years and an additional .25 bps each year beyond that.

Year (ARM) 30 Year Fixed 5/1 ARM 5/1 (30 Year PMT)
6 (4.99%) $4,774 $5,191 $4,979
7 (5.24%) $4,774 $5,317 $5,100
8 (5.49%) $4,774 $5,441 $5,218
9 (5.74%) $4,774 $5,562 $5,334

Finally, if you are certain that you will be holding the property longer than 10 years, there’s not much advantage to an ARM.   Why use short term financing on a long term asset?  Also, there’s nothing wrong with having the piece of mind of a low rate locked in for 30 years.

30A Condo Lending

Info for realtors and borrowers on 30A

A common mistake for buyers looking for mortgage financing in South Walton is to perform an internet search for the “lowest rate” when shopping for a mortgage for a single family home or condo purchase.   The loan officer may look at income and assets and make a determination on qualification without having a valid understanding of the local marketplace. A loan officer unknowingly quotes rate and down payment options based on conventional lending terms. Weeks later the borrower gets hit with the news that they are going to have to put much more down, have a much higher interest rate, or both.

When it comes to financing a condominium in South Walton, most properties are considered “non-warrantable” based on Fannie and Freddie guidelines. The concentration of investor owned units is deemed to be a higher risk and thus are labeled “non-warrantable”. These non-warrantable lenders typically charge a premium of 1 to 1.5% in rate and often require 25% or more down.

It’s important for potential buyers to work with local lending sources who have a sound knowledge of the subject properties and access to portfolio lenders. Loan officers will need to clearly explain the potential added financing costs of condo ownership.

Let’s look at a sample scenario on a $1,000,000 condo purchase, with a 25% down payment. Again, most portfolio lenders will charge a premium as much as 1 to 1.5% in rate. So for a non-warrantable condo, we will assume 5% interest rate on a 5/1 ARM

  • Down Payment – $250,000
  • Principal and Interest – $4,026
  • Insurance – $150
  • HOA Dues – $1,416

Total monthly cost is $5,592

Alternatively, consider a $1,250,000 single family home. Many lenders will only require 20% down and currently 5/1 ARM rates are 3.25%.

  • Down Payment – $250,000
  • Principal and Interest – $4,352
  • Insurance – $500
  • HOA Dues – $361

Total monthly cost is $5,213

Of course there are other factors such as taxes and maintenance costs – this is merely a quantitative approach to assist a buyer on the decision tree. This is also not to say single family is a better route. We all know you’re not going to get an ocean view for $1M in single family anywhere along 30A.