Condos!!!

Condos are a place that makes most loan officers cringe. Since the downfall of last year, banks have become very strict on lending to condos. They see them as a risky investment and require a lot to get into. But still, banks will still lend money out for condos, with a higher interest rate of course. When you start looking for a condo, there are two questions you need to ask.

1) What is the occupancy level of the condo? That doesn't translate to how many people are living there, but how many people own there condo and live in it. People who rent out a condo do not count in the occupancy level. If it is less than 50%, you are going to run into some major problems. Usually you have to come to the table with at least 40% down payment to let them consider loaning you any money to buy it.

2) Is the condo a warrantable condo? A warrantable condo is a condo with features that lenders view as favorable in terms of their risk exposure on loans secured by individual condo units. Fannie Mae or Freddie Mac will not be able to buy the loans of condos if they are non-warrantable. To be warrantable, a condo must fit in one of these three classes:

CLASS I

1. Developers control of the homeowners association has been turned over to the condo owners
2. Project is not subject to additional phasing or add-ons which have not yet been completed
3. All common elements and amenities must be fully installed, completed and in operation
4. 70% of all units in the entire development must have been sold and or legally obligated to close
5. 70% of all units in the entire development must have been sold to owner occupants

CLASS II

1. Recent or current condominium conversions (from apartments)
2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years
3. Project is not subject to phasing or add-ons which have not yet been completed
4. All common elements and amenities are fully installed, completed and in operation
5. 70% of the units in the entire development must have been sold and/or legally obligated to close
6. 70% of the units in the entire development must have been sold to owner occupants
7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessments

CLASS III

1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year
2. Project is not subject to phasing or add-ons
3. All common amenities are fully installed, completed, and in operation
4. 90% of the units have been sold (owner-occupancy of at least 60%)

A CONDO QUESTIONNAIRE MUST BE COMPLETED BY THE MANAGEMENT TO DETERMINE PROJECT ELIGIBILITY

It's not a easy process, but when it's done, it will be more than worth it.

Closing Costs!!!!

Closing Costs!!!! The word, COST, alone is bad enough. Just hearing that word sends hate, fear, anxiety through our system. No one likes costs, is uses up our money. But they’re necessary sometimes and you just can’t get around it. What’s even worse than just cost…closing costs. Those words together can REALLY upset someone who is trying to buy a house. It’s hard enough just to come up with the down payment, but now you have to come up with more money to get in that house. Closing costs exist because everyone wants their share of the pie. The loan originator, the bank, the title company, etc. But most people don’t know what these costs are, or they don’t know if the fee should be there or not. Usually closing costs are usually between 2% to 4% of the purchase price. The list below is the usual costs associated with buying a home or refinancing your home (Some states differ on what can and cannot be charged. Always compare your lender).

• Title Policies
• Escrow or Reserves
• Notary
• Wire fees
• Courier / Delivery
• Attorney fees
• Endorsements
• Recording Fees
• State, County or City Transfer Taxes
• Home Protection Plans
• Natural Hazard Disclosures
• Home Inspection
• Loan origination points
• Lender/Bank Fees

Now not all of these fees are paid by the buyer, sometimes the seller will pay some of these costs (It all depends on the deal that is worked out). When it comes to refinancing, usually all of these costs can be rolled into the new loan. But don’t sweat it; it will be worth it once you get into your new home!

Mortgage Terminology

Welcome to the start of my home mortgage education, learning, and curiosity blog. As you are going through the home buying process, one comes across many words that no one understands except the loan officer and the real estate agent. So to start off my blog, I would like to educate some of you curious readers with the common terms associated with getting a home loan.

Closing Costs
-Expenses incurred by the buyer and seller in a real estate or mortgage transaction. (I will get more in depth on this in the next posting)

PITI
-Principal, Interest, Taxes, Insurance

Earnest Money
-A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow/title company.

Equity
-The market value of the property, minus the amount of any liens/loans. Equity is often expressed as a percentage of the property value.

Escrow Account
-An account setup through the lender (bank) to hold over monies received from the borrower (buyer) to pay for certain debts. Usually setup for insurance and taxes.

Good Faith Estimate (GFE)
-The form that lists all the charges the borrower must pay at closing. The lender or loan officer is obligated to provide the borrower this form within three business days of receiving the loan application.

LTV
-Loan To Value. The percentage of the amount of the loan to the value of the home or the appraised value of the home. This helps determine the equity in your home.

Mortgage Insurance
-Insurance that covers the lender (bank) incase the borrower (buyer) defaults on the loan. Given out to borrowers that have less than 20% equity in the their home.

Points
-Fees paid by the seller and/or buyer. They can either be origination and discount . 1 point = 1 percent of the loan amount. Example, on a $100,000 loan, 1 point is $1000. Origination is what the loan officer charges the buyer, which can range from 0 points to 1 point. Discount points is what the lender charges the buyer, which ranges from 1 to 3 points.

80-10-10
-Rule for financing a home, 80 is the percentage amount of the home value the lender (bank) will loan up, 10 is the percentage amount the 2nd lender will loan up and 10 is the last amount provided by the borrower (buyer).

80-15-5
-Rule for financing a home, 80 is the percentage amount of the home value the lender will loan up, 15 is the percentage amount the 2nd lender will loan up and 5 is the last amount provided by the borrower (buyer).

Underwriting
-The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc. This part of the process is carried out by the bank.