Why Pre-Approval Is a Game-Changer This Spring

Spring is here, and with it comes the busiest season in real estate. As more buyers hit the market, the competition increases. If you’re planning to buy a home this spring, there’s one crucial step you can’t afford to skip: getting pre-approved for a mortgage. Here’s why pre-approval is more important than ever.

What Is Pre-Approval, and Why Does It Matter?

Pre-approval gives you a clear picture of how much STM is willing to loan you for your new home. The process involves a review of your financial history, including factors like:

• Debt-to-Income (DTI) Ratio: How much you owe versus how much you earn.
• Income and Employment: Proof of steady income reassures the lender you can repay the loan.
• Credit Score: A higher score can increase your borrowing potential.
• Payment History: Lenders want to see that you’re a responsible borrower.

Once approved, you’ll receive a pre-approval letter detailing the amount you can borrow. This step not only boosts your confidence but can also speed up the process, as your loan officer already has much of your information on file.

It Helps You Set a Realistic Budget

Spring is competitive, and emotions can run high when you find the perfect home. A pre-approval letter helps you stay grounded by giving you a clear budget.

Take time to crunch the numbers, factoring in additional costs like property taxes, insurance, and HOA fees. Once you know your true budget, work with your agent to focus on homes within your financial comfort zone.

It Makes Your Offer Stand Out

In a competitive spring market, it’s not just about finding a home—it’s about getting the seller’s attention. A pre-approval letter shows that you’ve already been vetted financially and are ready to act fast.

When sellers are reviewing multiple offers, yours could rise to the top simply because you’ve already taken the time to get pre-approved.

A Few Important Tips

Once you receive your pre-approval, keep your financial situation stable. Avoid switching jobs, taking on new credit, or moving money around, as these changes could affect your pre-approval status.

If you’re buying a home this spring, getting pre-approved should be your first step. It helps you understand your budget, makes your offer more attractive to sellers, and keeps you from falling for a home that’s out of reach. Ready to get started?

Reach out to your STM loan officer today!

Financial Literacy Month: Condo Mortgages Made Simple: What You Need to Know

Buying a condominium can be an exciting milestone, but securing a mortgage for one can be slightly different from financing a single-family home. Understanding the nuances of condominium mortgages can help you navigate the process smoothly and avoid potential roadblocks.

 What Makes Condo Mortgages Different?

Condos are popular for many reasons—they typically require less maintenance and can be more affordable than single-family homes. However, financing a condo can be more complex. One key factor that lenders consider is whether the condo is “warrantable” or “non-warrantable.”

 A warrantable condo meets the criteria set by government-sponsored organizations, such as Fannie Mae or Freddie Mac,  which make it eligible for conventional mortgage financing. These condos are easier to finance, offer lower interest rates, and have more flexible down payment options.

 A non-warrantable condo does not meet these standards, requiring alternative financing, as they are a riskier investment in the eyes of lenders. These projects may require alternative financing programs. 

 Characteristics of Warrantable and Non-Warrantable Condos

Warrantable Condos:

• Replacement Reserve Funding: The homeowner’s association (HOA) is financially stable, with at least 10% of its annual budget allocated to reserves.
• Ownership Concentration: No single entity owns more than 20-25% of the units in the project (or owns more than 2 units for a project less than 21 units).
• Commercial Space:  The project’s commercial space (e.g., retail or offices) is limited to 35% or less of the total square footage.
• Litigation: No pending or active litigation against the project that could impact its financial stability, such as structural defect litigation; however, minor Matter Litigation is acceptable.
• Delinquent HOA Dues: No more than 15% of the unit owners are 60+ days delinquent in HOA dues.
• Insurance: The project has adequate hazard, liability, and flood insurance (if applicable).

 Non-Warrantable Condos:

• Financial Instability: The HOA has financial issues, inadequate reserves, or a history of legal disputes.
• Ownership Concentration: A single entity owns more than 25% of the units in the project
• Commercial Space:  Commercial Space exceeds 35 of the total square footage in the project or project building.
• Condotel:  The project operates as a Condotel or is primarily a transient housing project.
• Insurance: The project lacks sufficient insurance coverage.

More Options Available!

FHA, VA, and USDA loans are also viable financing options for condos, offering lower down payments and flexible eligibility—especially if the condo meets their specific guidelines.

 Understanding Condo Mortgage Payments (PITIA)

When obtaining a mortgage, it’s essential to understand how your monthly payment is structured. In the mortgage industry, the acronym PITI represents the four basic components of a home loan payment:

1. Principal – The amount borrowed for the loan.
2. Interest – The cost of borrowing the money charged by the lender.
3. Taxes – Property taxes paid to the local government.
4. Insurance – Unit Owner’s insurance is used to protect against damage or disasters to the condominium interior.

For condos, an additional component is added, making it PITIA:

1. Association Dues (HOA Fees) – Monthly fees are paid to the homeowners’ association to cover operating expenses (maintenance, insurance, management), as well as setting funds aside in a reserve account for major component replacement (roofs, siding, streets, windows, balconies, etc.) 

Financing Options for Condos

Southern Trust Mortgage offers conventional financing options (Fannie Mae, Freddie Mac) and government options (FHA, VA, and USDA).  We also offer non-warrantable options, including Condotel financing. Contact your lender to see which program is right for you and the condo project you are interested in!

Reach out to your STM loan officer to learn more about condo financing! 

We’re here to help you find the best mortgage solution for your needs!

Financial Literacy Month:  HOA Rules & Regulations – What You Need to Know

When you’re buying a condo, understanding the HOA (Homeowners Association) rules and regulations is essential.

These guidelines protect property values, maintain community standards, and keep residents safe. However, not all HOA rules are created equal, and some can feel restrictive. Here’s what you need to know:

Key HOA Documents to Review:

Before you commit to purchasing, be sure to review these key HOA documents:

1. Covenants, Conditions, and Restrictions (CC&Rs)
   Think of this as the “community constitution.” It includes guidelines for property maintenance, architectural changes, and shared areas.
2. Rules and Regulations
   These govern daily life—like landscaping, parking, and noise levels. These are more flexible than CC&Rs but still enforceable.
3. Bylaws & Articles of Incorporation
   These provide operational guidance on how the HOA functions, including board responsibilities and voting protocols.
4. Plat
   This is a map showing the layout of the community, including unit locations, roads, and common areas.

Important Questions to Ask the HOA

1. How much are the fees, and what do they cover?
2. What are the rules on renting out my unit?
3. Are there any major upcoming repairs that could result in special assessments?

We’re Here to Help

Navigating the world of condo financing and HOA rules doesn’t have to be overwhelming. As your local experts, we’re here to answer your questions and ensure you make an informed decision.

Reach out to your STM loan officer today to get started!

Financial Literacy Month: Why Condos Make Smart Financial Sense

This Financial Literacy Month, we’re looking at why condo purchases just make sense. For someone looking for a low-maintenance lifestyle, a condo could be a budget-friendly alternative to a single-family home. Let’s explore why condos make financial sense.

Budget-Friendly Homeownership

Condos provide an affordable entry point into the real estate market. Their smaller size and shared walls often mean a lower price tag compared to single-family homes. This allows buyers to:

✔ Invest in desirable locations at a fraction of the cost
✔ Enjoy lower upfront costs and potentially smaller mortgage payments
✔ Build home equity while staying within budget

HOA Benefits: More for Your Money

While HOA fees are an added expense, they often cover essentials that can save homeowners money in the long run. Many condo HOAs include:

✔ Maintenance – Landscaping, exterior repairs, roof upkeep
✔ Utilities – Water, gas, and in some cases, electricity
✔ Amenities – Pools, gyms, and community spaces that would cost much more in a single-family home

This predictable cost structure helps condo owners budget more effectively without unexpected home maintenance expenses.

A Smart, Low-Maintenance Investment

Condos can be an excellent long-term financial decision due to their lower upkeep costs and shared expenses. For buyers looking to stay in a prime location without the high costs of a traditional house, condos offer:

✔ Stable property values in growing urban markets
✔ Lower maintenance responsibilities, thanks to HOA management
✔ Investment potential, whether for rental income or resale value

Condos offer a smart path to homeownership, combining affordability with long-term financial benefits. STM is equipped with our exclusive Condo Expert, whose knowledge and experience have helped many borrowers achieve condo ownership.

Thinking About Buying a Condo? Contact your STM loan officer today to learn more!