Blog Layout

Closing Costs and Down Payment–Know the Difference and Know Your Options

Dottie Spitaleri • Mar 09, 2022

Getting a mortgage requires some cash on hand. How much you spend is going to depend on knowing the difference between closing costs, your down payment, and how you want to allocate your funds. Closing costs and down payments play a different role in getting a mortgage loan.


Here is the difference;






There is a big difference in financing a SFR (single family residence), Condo and a PUD (Planned Unit Development) and it is important that you are educated upfront!


A Single-Family Residence (SFR) is intended for the use and occupancy of a single-family. They are Fee Simple Estates which is the greatest interest one can have in real property. A Planned Unit Development (PUD) is also a Fee-Simple Estate like an SFR. Most have an interest in common area(s) and amenities such as clubhouse, pool, entranceway, etc., and are part of a homeowners' association. 


You pay HOA dues to help keep up the amenities. HOA’s also have what’s known as covenants that are recorded and filed with the state. These layout the rules and regulations of the development. 


For example, no recreational vehicles parked in the driveway, or no business vehicles allowed on premises overnight, etc. A Condominium is real property estate where there is an undivided interest in common in a portion of real property along with a separate interest in space called a unit. A condo owner shares ownership along with other unit owners as defined by their "Condominium Plan''. It usually consists of "airspace" within the walls of their unit. This type of ownership does not usually include the actual structure. Financing will vary per property type, especially for condominiums. 


Here is why. 


When you buy a condo, you buy the interior unit. The exterior of the property, as well as all common areas, are shared amongst all condo owners in the development. Condominiums must meet the following requirements at a minimum related to their ownership and governance to be warrantable. No single entity owns more than 10% of the units in a project, including the developer, at least 51% of the units are owner-occupied, Fewer than 15% of the units are in arrears with their association dues, there is no litigation in which the homeowner’s association (HOA) is named, Commercial space accounts is 25 percent or less of the total building square footage. 


To recap:



  • No single entity owns more than 10%
  • At least 51% of the units are owner-occupied
  • Fewer than 15% of the units are in arrears with their association dues
  • No litigation in which the homeowner’s association (HOA) is named
  • Commercial space accounts is 25 percent or less of the SQ FT


With condos, you have to remember, it’s not just your creditworthiness the lender has to worry about. They also have to worry about the fiscal and physical health of the entire development into which you’re buying.


Non-warrantable condo financing is unavailable via Fannie Mae, Freddie Mac, FHA, and VA so you will need to get with your mortgage professional to further discuss other financing options. Or give me a call, (727) 543-1753. I would be happy to discuss your options.


How do I know if the condo is warrantable or not?


The lender will have to send a form called a “condo questionnaire” to the condo association or management company. The questionnaire allows the lender to determine if the condo meets its requirements for a loan. If the requirements are met, the lender can in turn consider providing a loan to the condo buyer. 


There are extra fees required for condo financing. Each condominium management company charges fees for completing this form and the fees can vary from association to association. They can range from $150 - $800 sometimes more. These fees are non-refundable and will need to be paid in full prior to the form being completed. There is another fee that will be collected by the title company at closing for the “Estoppel Letter”. This fee is usually $150-$250. 


These letters are normally requested by title insurance companies when a unit is closing to ensure that all assessments are paid up and to prorate assessment contributions between a buyer and seller just like is done with taxes. If the title company does not verify the number of assessments that may be due, the new owner becomes liable for all past assessments and could then make a claim against the title insurance company for contribution. Not only are there additional fees but the rates are typically higher for this type of loan as well as some lenders may require a larger down payment especially if it is a second home or investment property. 


It is best practice if you get with your mortgage professional at the time of pre-qualification to make sure that you are completely aware of what is required and what you can expect throughout the lending process. 


If you don’t have a broker or lender to talk to, give me a call (727) 543-1753.


To learn more about me, Dottie Spitaleri, visit
https://www.ddamortgage.com/dottie.


Start Your Loan with DDA today
Your local Mortgage Broker

Mortgage Broker Largo
See our Reviews

Check out our other helpful videos to learn more about credit and residential mortgages.

By Didier Malagies 25 Mar, 2024
Home equity levels among homeowners aged 62 and older are at record levels following the end of the pandemic. As a result, reverse mortgages may no longer be considered a “loan of last resort” as financial planners aim to highlight their uses as part of a comprehensive financial plan in retirement. This is according to a column published this week by Investment News, soliciting input from planner professionals well known to the reverse mortgage business, including Wade Pfau. But other data suggests convincing borrowers of the benefits remains very challenging. Reverse mortgage use as part of a broader financial plan “is really the intention in the financial planning space,” Pfau told the outlet. While reverse mortgage customers benefit greatly from low rates, the current high-rate environment doesn’t fully cancel out their potential use as a planning tool, he explained. “It’s all about the sequence-of-returns risk in retirement planning […] Spending from the home equity helps you preserve more investments, so there is going to be a bigger legacy at the end,” Pfau told the outlet. “The beneficiaries can get more. They can pay off the loan and still have a net windfall.” This perspective is consistent with prior statements Pfau has provided to other outlets, including to RMD . Other financial planners adjacent to the reverse mortgage space offered their own thoughts, including Steve Resch, vice president of retirement strategies at Finance of America Reverse (FAR). “The goal is for the client or the family to always retain an equity position in that property. […] Years ago, that wasn’t the case,” Resch said in the story, describing the housing crisis of 2008 as a “reckoning” for the reverse mortgage industry as well as the larger housing ecosystem. Resch explained that the ballooning length of retirement in America contributes to the potential utility of a reverse mortgage for qualifying borrowers. “It’s simply a matter of demographics,” he told Investment News. “We have an enormous population that is moving into retirement. We’ve got a massive amount of equity available. We’re looking at 20- to 30-year retirements. Bringing home equity into that plan really makes sense.” Another financial planner, Gateway Wealth Management founder David Foster, cited Pfau’s work in particular as helping to bring him around on the product category as a planning tool for clients, but convincing them to take a closer look at a reverse mortgage remains a major challenge. “I think reverse mortgages might be the single most underutilized retirement planning tool,” he told the outlet. “I have found it extremely difficult to have a rational conversation with my clients about reverse mortgages. Most people who’ve paid off their house just cannot fathom the idea of going back into debt. “No amount of logic will be able to convince them that it is wise to borrow against their house in retirement after having worked so hard to pay off their home prior to retirement,” Foster added. “I’ve even had people get borderline angry with me for even suggesting the idea.” Last year, Mutual of Omaha Mortgage released survey data suggesting that education hurdles remain very steep for the reverse mortgage industry when aiming to connect with a variety of different borrowers on multiple potential use cases. 
By Didier Malagies 25 Mar, 2024
You have Conventional Mortgages, FNMA/FHMC, FHA, VA, Reverse Mortgages, Bank Statement loans, DSCR, Reverse Mortgages, and 1099 mortgages. Depending on your particular situation, could be a choice based on credit scores, income, funds to close Buying a home using Bank statements to qualify for a mortgage Buying a home using a 1099 only to qualify for a mortgage Using rental income to qualify for a mortgage Or being a first-time home buyer with just 1% down to purchase a home tune in and learn more at https://www.ddamortgage.com/blog didier malagies nmls#212566  dda mortgage nmls#324329
By Didier Malagies 18 Mar, 2024
What if you refinanced your lower-rate first mortgage into a higher rate but consolidated all of your debt into one low payment. Getting rid of credit cards, car loans, installment loans, and student loans. What would your savings be a month and how much would you save? Then if property values were ever to plummet and rates came crashing down. Just go back to 2007 when we were able to refinance everyone on the HARP program. I just break things down to worse-case scenarios and how you can stay ahead of the game with your finances no matter what. I think it is time to get the house in order and save money, doesn't seem like food , medical or anything is going down but instead still going up Maybe everything we are told is not exactly correct tune in and learn https://www.ddamortgage.com/blog Didier Malagies nmls212566 DDA mortgage nmls#324329
Show More
Share by: