30A Review

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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.