As many of you know, financing for a condo purchase can be challenging in the aftermath of the financial crisis. Lenders have always reviewed the condo association status before providing loan approval but the burden of project approval and resulting liability of potential inadequate approvals have shifted to the lender. So the process has become more difficult and time consuming.
Here are some issues to be aware of:
1. FHA changed the approval requirements back in February. In the past, lenders checked FHA's web site for approval. If it showed the condo as "approved," we were good to go. If it was not "approved" we submitted a spot approval request and hoped the underwriter would approve it. There are NO more spot approvals. To make matters more confusing, FHA has gone back and forth regarding the approval status of condo associations on the website. The most current information out of FHA's regional center in Atlanta is that if a condo association was previously approved prior to the February change, then the approval will expire on 12/7/10. Lenders may want to recertify that the investor concentration in the community is still below the maximum percentage before granting approval. Associations that were not approved or have not been recertified will require new certification and approval; a process which will take at least 60 days to complete. If the condo has already gone through the new approval process then a different expiration date will appear. But it is up to the each borrower's lender to again certify that the community meets FHA requirements. And that process can be just as lengthy.
Fun stuff, eh?
2. Conventional loans require the condo project to be approved through a project management review system. The process is not as time consuming but much of the same information will be reviewed for approval.
3. VA loans haven't changed the requirements. Check for approval status using the following link: http://condopudbuilder.vba.va.gov/2.2/frames.html
Either way it is clear that the lender and real estate professional will need to work together in an effort to expedite condo association approvals. Here is a list of some of the items that we will be gathering:
1. Completed FHA Condo Questionnaire.
2. Copy of the recorded Declarations, Covenants, & Restrictions.
3. Copy of the By-Laws.
4. Copy of the Articles of Incorporation.
5. Copy of the master insurance policy.
6. Copy of current and previous year's budget outlining income, expenses, and reserve amounts.
7. Copy of current reserve plan and balance sheet showing reserve balances.
8. Copy of the preliminary title report.
9. Appraisal.
10. Copy of Recorded Plat.
11. Flood Certification and/or copy of FEMA map for location.
Issues to be aware of: investor concentration, percentage of FHA loans in the community, any future additions or special assessments, pending legal actions, single entity ownership, adequate reserves.
Please contact me directly if I can help you with your real estate or mortgage related need. Thank you!
Getting a home is both exciting and stressful. Stress usually arises when it comes time to consider the amount of money that a home will cost the buyer. In particular, coming up with enough money for the down payment can bring quite a bit of anxiety. How much money should a buyer have to put down? It depends on the type of loan that a person is getting.
Government Loans
Government Loans
There are programs operated by the federal program that were created to make it easier for certain groups of people to get homes. If a person has served in the military, the U.S. Department of Veterans Affairs has a loan guarantee program that lets the buyer move in without a down payment. Also, the Department of Agriculture’s Guaranteed Rural Housing Loan Program allows people living in certain rural areas to get homes without putting any money down.
Anyone who qualifies for a mortgage backed by the Federal Housing Administration can buy a home with as little as 3.5 percent down. However, there is a mortgage insurance premium that needs to be paid up front.
Private Conventional Lenders
Mortgage lenders such as banks can require quite a bit more for down payments. The main reason is they are assuming risks that are not backed by the government. Any losses are suffered by the lenders and their investors.
The amount of a down payment varies from lender to lender. Some customers with a track record of being exceptionally creditworthy can pay as little as 5 percent down. Others may be allowed to pay 10 percent as the down payment.
However, anyone putting down less than 20 percent will be required to purchase private mortgage insurance. That is, if the lender must finance more than 80 percent of the home’s selling price, there is a premium charged. There are two critical purposes for the PMI: It protects the lender against losing money if the borrower defaults on the obligation and it helps a buyer with less cash on hand still have the chance to get a home.
Lenders like it when a person can pay at least 20 percent of the selling price as the premium. That is a sign the loan repayment is affordable to the borrower and the buyer is also willing to demonstrate their commitment with a large amount of his or her own funds. One plus for the new home owner is having a sizeable amount of equity as soon as moving day. Another is the higher the down payment, the better the likelihood the terms of the loan will be exceptional.
Remember that a lender will want to scrutinize your finances. Try to have the down payment in your bank account a few months before applying for the loan. If the money suddenly appears such as with a gift, the lender may wonder whether you really will be able to pay back the loan.
