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In order to get Federal Housing Administration (FHA) insurance on a condo unit, the building itself will have to be re-certified. This is important because without certification the buyer will be unable to get a mortgage that is insured by the FHA. These mortgages generally come with a lower down payment, and they are easier to get in terms of borrower qualifications. They are usually the first choice for first time buyers.
The sale can still be completed but the buyer will have to have a much larger down payment, and also meet more stringent credit guidelines. The impact to many borrowers is that they will sit on the sidelines for a few more years and try and save a larger down payment.
There are two basic rules that are posing headaches for condo associations.
The first is the owner occupancy rule. In order to get the FHA insurance on a unit, the condo building must have a minimum of 50 percent owner occupancy. In today’s dire economic conditions, real estate investors are the people with cash and they are willing to buy properties that are in good condition. They are looking for real estate to put on the rental market.
The second hurdle is the rule that says that no more than 10 percent of the units can be owned by one investor. What’s the harm in having an investor buy 30%, 40% or 50% of the total units? FHA officials feel that there would be too many rentals units in the condo buildings and that prices would fall further. This is far from the truth. Vacant units will drive prices down. In addition, the more vacant properties, the higher the likelihood that condo fees would increase. If you have a condo building with 600 units and 250 units are vacant, then we have only 350 owners to fund the costs of running the entire complex.
Let investors buy as much as they want. It is good for the current condo owners. If they want to sell chances are that they would get market value for their units.
For more information on mortgages, finance and real estate, please visit:
House Refinance Center
Related articles:
Understanding Fixed Rate Mortgages
Gifted Down Payment From Family Members
How To Buy Bank Owned Real Estate (REO)
November 17th, 2011
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September was a good month for new home builders. Sales of single family homes were up 5.7%. The Commerce Department reported sales of 313,000 units. September last year the amount was 316,000.
There are two issues in play with this scenario. First, does this signal a housing recovery? And second why would a homebuyer opt for a new house when there are millions of great deals in the resale market?
The median sales price for new homes was $204,400 in September. This is down 2.2% from $209,100 from August. In contrast, the median sales price for existing homes was $165,600 in September. Buying a resale house could save you about $44,000.
A good September in new home sales is not the beginning of a recovery. To understand the recovery picture we should look at the contract failures. Contact failures occur when a deal falls through. This could be because of a job loss, an appraisal that was way below the contracted price, a home inspection that turned up serious problems or a declined mortgage application. In September contract failures were 18%, same as in August. But this is up from 9% for the same month in 2010.
Another hurdle to the housing recovery is the access to credit for first time homebuyers. Lenders have tightened their underwriting guidelines in response to the foreclosure mess and the robo-signing fiasco. The immediate results are the slowing of foreclosure and short sales activity.
If the Obama Administration can find a way to remove these barriers to homeownership, we will be on our way to housing recovery.
For more information on the housing market and mortgages please visit:
House Refinance Center
Related articles:
Who benefits from a short sale? Not the homeowner!
MERS is out of the foreclosure business
October 26th, 2011
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Many homeowners are finding it hard to make their mortgage payments. At the same time, house prices are falling. A loan modification is the best option for these desperate homeowners.
HAMP is generally the first choice for homeowners. If this fails the borrowers will then ask their lenders to give them a direct loan modification. To give your loan modification the best chance of being approved, there are a few important steps you should take.
Do not make big purchases before applying for the loan modification.
You have to convince the lender that you have a hardship. This hardship prevents you from making your scheduled mortgage payments. How can you explain a 7-day cruise to the caribbean? Or the purchase of a new car, or a 52-inch flat screen TV?
Always submit a hardship letter.
Many loan modification applications are lacking a hardship letter. The hardship letter explains why you are having problems paying your mortgage. A hardship is a chronic illness resulting in large medical bills, or a job loss, or even a demotion which resulted in a smaller salary. Be honest, be precise and be prepared to prove your hardship.
Do not have an extraordinary amount of credit cards.
Credit cards are red flags to lenders. They put fear in underwriters. More time is spent analyzing credit cards than on other aspects of the application, such as employment. If you are maxed out the decision for the underwriter is easy. You are declined. If you have small balances but high limits, the lender has to determine if you will go on a spending spree after the approval. So keep a minimum of credit cards.
More articles on mortgages, news, tips and advice, please visit:
HOUSE REFINANCE CENTER
Related mortgage stories.
Banks are sitting on thousands of houses with mold and mildew: Would you buy one?
Adjustable Rate Mortgages (ARMs) should be falling: Check your LIBOR
Mortgage Discrimination: Can a woman be declined because she is pregnant?
September 13th, 2011
Children are paying for our mistakes. Foreclosures hurt them more than we realize.
Continue Reading August 22nd, 2011
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TGIF! It was an interesting week. The stock market was down. Then it was up; then down again; finally closed the week up slightly. The republicans had a debate. Rick Perry wants to be the next President. And finally some news that we can be upbeat about. Interest rates fell through the floor, and straight to the basement. The 30 year fixed is at 4.32%. And the 15 year fixed set a record at 3.5%.
All this news about interest rates started people talking about refinancing the mortgage. A broker friend said that his phone was ringing off the hook. And lenders are starting to see an increase in the volume of applications.
Now, is this the start of a housing recovery? Well, not so fast. There are two things wrong with this picture. Number one, how many of these applications will be approved for a mortgage? Number two, what will the appraisal say about the value of the house?
I believe that less than half of these application will be approved. Banks are tight on credit. You can’t blame them. Look at all the litigation flying around over “bad loans” and other consumer issues. AIG is suing Bank of America for $10 billion. Bank of America just settled with HUD for $10 million. Bank of America settled a class action suit over fees, for $410 million. Wells Fargo sued by the Justice Department for discriminatory lending. Wells paid $85 million so far. And investors are lining up to get their day in court. Their position is that the banks sold them “bad loans”. So, lenders are looking for squeaky clean loans.
On the issue of appraisals, this could be a nightmare. Homeowners would say that they are aware that house values have plummeted across America. But they would argue with the appraiser about the value of their homes. “No way, my price didn’t drop that much. I spend a lot of time renovating and fixing my house”, they would plea. Because of the drop in value, many homeowners will not be in a position to refinance at these historic low rates.
Let’s pray that we can get some of the foreclosure houses off the market.
For more articles on mortgage news, tips and advice, please visit:
House Refinance Center
Related articles:
Foreclosures: Squatters rejoice in new found homes.
Loan servicing mistakes every homeowner should look for.
Boston Community Capital to the rescue: Homeowners get a second chance to keep their foreclosure homes
August 12th, 2011
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You thought it was all over and that the banks were playing by the rules. The rules said that you had a choice to opt in to the banks overdraft protection plan or not. But some banks found another way to make huge profits from overdraft fees. A year after financial reform we are still having issues with the big banks over fees.
Union Bank of California is facing a class action lawsuit over illegal overdraft fees. It is alleged that the bank runs a computer program that re-sequences the customers’ daily transactions. For example, if a customer had a transaction at 10 am for $5, another at 11am for $15 and a third transaction at 2pm for $120. The bank would process the largest transaction first. Then the second largest and so on. Now If the customer had only $50 in the account, there would be three overdraft charges at $35 each.
This should not happen. Transactions should be processed as they occur. The earliest transaction first. In our example, there would be only one overdraft fee. This would occur at the third transaction. There was a extra $70 that the bank made by re-sequencing.
How to protect yourself.
1. Check you bank balance at least once each day.
2. Check you bank statements and report any suspicious entries immediately.
Banks try to defend this practice by saying that large transactions are generally for important things, for example, mortgages, rent payment and car notes. This just doesn’t make sense.
For more mortgage news, tips and advice, please visit:
House Refinance Center
August 8th, 2011
Lenders offer cash to distressed homeowners.
Continue Reading July 29th, 2011
The 30 year fixed rate mortgage is not needed. Get rid of it. Let’s go with 15 year, 20 year and 25 year fixed rate mortgages.
Continue Reading April 25th, 2011
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Imagine getting the exterior of your house painted for free. And to top it off the painting company pays your mortgage. So what is the catch?
The company, Adzookie, will turn your house into a billboard advertising it’s mobile advertising service. The whole house will be painted. However, the part that stands out is the company’s logo and contact information.
The ad will remain on your house for a minimum of three months. If all parties are happy with the arrangement, the agreement can be extended to one year. If you are dissatisfied, you can cancel the deal and the company will repaint your house to the original color.
To qualify for the program, the homeowner must own the house. Rentals and leases are excluded. It also helps if your house is on a high traffic street and in a prominent zip code.
This sounds like a good marketing idea. There have been over 3,000 applications since the program was launched three weeks ago. Does the company have the funding to pay 2,000 mortgages? This is a relatively new company and chances are that it is still in the “getting established phase”. My guess is that less than 200 deals will be done. Neighbors pressure will force homeowners to rethink this venture and eventually opt out. The costs to the company will be high. First, painting a house, then repainting the same house, and finally paying the mortgage of the homeowner.
Related articles by House Refinance Center.
Should you prepay your mortgage?
Mortgage amortization: You need to understand how your mortgage works.
How to buy foreclosure real estate at auction.
How to make an offer on a Freddie Mac house (HomeSteps)
Should notaries be punished for their roles in foreclosure robo-signing?
April 10th, 2011
Your loan servicer can change anytime. Make sure you know the company that gets your money. If there are errors in your account you know where to get answers.
Continue Reading February 9th, 2011
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