The House passed the $8,000 first-time homebuyer tax credit earlier TODAY.   The legislation will be sent to the President, and upon his signature, made law.. 

*Recipients of the tax credit must ratify a contract no later than May 1st and close on their purchase no later than June 30, 2010.

*The tax credit gives up to $8000 for first time buyers (defined as not having owned a home for the past three years)

*This revised version also allows up to $6500 credit for move-up buyers (those who have owned and occupied their current homes for at least five years).

*You have to be an owner occupant of this primary residence as there are no provisions for investors.

*Qualified recipients of these tax credits will have an income cap of $125,000 for single filers and $225,000 for joint filers.

*The purchase price of the subject property has a cap of $800,000.

*If the property being purchased fails to remain a primary residence anytime within the first 36 months, the tax credit will have to be repaid in full for that tax year.

Homebuyers will qualify for the tax credit until April 30, 2009, and have an additional 2 months (until 6.30.09) to close the transaction. 

Mark Zaidan, Maryland loan officer
301-881-8900

The deduction is phased out for taxpayers (both single and married filing joint returns) with adjustable gross incomes over $100,000. © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

 

Many of you probably have a second mortgage in the form of a HELOC (Home Equity Line of Credit).  But do you know how it differs from your conventional loan?

HELOCs are just that, a line of credit. They are not an amortized loan with a fixed rate over a fixed time period.  HELOCs are adjustable.  Typically the rate is the Prime Rate (which can fluctuate) plus a margin.

This potential fluctuation can be concerning to more conservative borrowers. Another thing to be aware of is how they are amortized. Typically, when you borrow against your HELOC, your statement will only ask for the interest on that money borrowed.  Unless, you volunteer monies above and beyond what they are asking for, you won’t make any progress on your principal.

Other pitfalls include the fact that HELOCs often don’t have caps. As long as the Prime continues to rise, so will your payment. Also, keep an eye out for the terms of your pre-payment penalties.  If you close out your line within 3 years, you will most likely incur a fee ranging from a few hundred dollars to 3% of your loan.

HELOCs can be very beneficial, Just make sure you understand them. They are often much cheaper to get than a conventional loan. In fact, they are often a no-closing costs loan. 

With homes depreciating over the past 2 years, many lines of credit have been ‘frozen’ by the lender.  Guidelines have tightened, particulary with the Loan to Value ratio you can go up to.  In the past, you could get a HELOC up to 100% of your home’s value.  Now, most lenders are capping this ‘LTV’ at 75% and lower. 

Many lenders are no longer even offering this product.  As we move forward we are finally seeing some HELOC programs come back into play.  Contact me for more information.

MD DC VA Loan Officer, Bob Kearns

Fannie & Freddie 125% LTV Refis

In an effort to reach out to more homeowners who are paying their mortgage, but could benefit from a refinance, Fannie Mae and Freddie Mac have further liberalized their underwriting rules under their special program created to help carry out the administration’s Making Home Affordable foreclosure prevention program.

Fannie’s Home Affordable Refinance and Freddie’s Relief Refinance Mortgage are now available for homeowners even further underwater (with home values less than the current mortgage).

The programs now will accept loan-to-value ratios of as high as 125% (up from 105%).  The refinance opportunities are available only for borrowers with mortgages currently held or guaranteed by Fannie Mae or Freddie Mac.

Borrowers should work with their existing servicer to refinance their mortgage. In the vast majority of these cases, the current servicer will not have to re-underwrite the borrower. © 2007, Real Estate Information Services & Capitol Assets

Mark Zaidan, Virginia loan officer

Most of the use of the new FICO 08 scores are being used by credit card companies and auto dealers. Currently, no mortgage lenders are using the new system. They are in the testing phase to see whether to incorporate it yet or not.

Changes were made available last month at all of the 3 major credit bureaus: Equifax, Experian, and TransUnion. The new system aims to focus less on minor infractions and concentrate more on larger trends in your spending habits.

-Small missed payments and amounts in collection of less than $100 will no longer negatively affect your credit scores.

-Nor will a more typical delinquency as long as it happened more than 2 years ago and assuming your credit is otherwise in good order.

-A deceptive practice known as “piggybacking” is also a target of the new scoring system. Piggybacking is when a person becomes an authorized user of a credit card of someone, who has much better credit. Previously, associating yourself on paper with someone with good credit would result in your credit scores being raised. The new system will seek to isolate the individual for his or her actual habits.

Bob Kearns, Maryland licensed loan officer

Fall homebuyers and sellers should be prepared to deal with one very exasperating issue: off-base appraisals.  At a time when home prices have been under downward pressure, appraisers have continued to scuttle contracts with low appraisals.

The problem is the current crop of appraisers being used has included some who are inexperienced in or unfamiliar with the local market.  In addition (or, perhaps, as a result), too often they have used distress sales (foreclosures and short sales) to provide comparable sales data. A recent clarification of acceptable procedures may start to improve things soon, we hope.

The problems all started with the Home Valuation Code of Conduct, which was implemented May 1 by Fannie Mae and Freddie Mac. The HVCC was created to settle a lawsuit that had been threatened by New York State Attorney General Andrew Cuomo.  The HVCC was meant to make appraisals more accurate and reliable by keeping the appraisal process at arm’s length from the undue influence of real estate agents and mortgage lenders.

The way that many lenders have chosen to deal with HVCC is to engage appraisal management companies (AMCs), even though the code does allow lenders to engage individual appraisal companies directly.  The AMCs redirect each appraisal to one of its contract appraisers (at about half the fee they were getting when they worked directly for the lender).

Unfortunately, in the recent past, that has not always been someone who has the kind of local knowledge that is necessary for an accurate appraisal.  Local expertise is crucial in a market where there are fewer comparables and where many of the ones that are on the books may be distress sales.

Recently, Fannie Mae and Freddie Mac took several steps to address appraisal issues that had the real estate community hopeful, though the jury is still out on whether they will have the desired effect.
First, they re-emphasized that appraisals need to be done by appraisers who are knowledgable in the local market.  But the AMCs argue that they are sending out appraisers who know the local market (even if they are from a different market 30 miles away). 
Second, Fannie & Freddie clarified that appraisers are not prohibited from talking with Realtors about such issues as finding better comps or correcting errors.  They are, however, insulated from being jawboned to come up with a set valuation, to “hit the number” necessary for a contract to go through.

Unfortunately, the time for a dialog between Realtor and appraiser is before the appraisal is completed, but there has been little demonstrated willingness to do that.  Getting an appraisal changed after it is done is like getting a baseball umpire to change a strike call. 

In late July, the Federal Housing Finance Agency, which oversees Fannie and Freddie, issued a rather defensive update on how HVCC was being implemented, in which it addressed several pieces of “misinformation.”  The FHFA attributed the additional cost of appraisals to tightened loan underwriting that requires additional comparables or second valuation opinions, not HVCC’s tilt toward management companies. Maybe.

The FHFA also addressed whether, if you change lenders before closing, you have to pay for a new appraisal.  It is at the discretion of the original lender whether they will transfer the appraisal to a new lender, FHFA says.  Sadly, while FHA hasn’t adopted the HVCC, many FHA lenders are using AMCs and charging even more than for Fannie and Freddie loans.

The bottom line for buyers and sellers this fall is that, until we see more reliable appraisals, be prepared to take steps to get better comparable sales data (and hope for the best) or renegotiate terms of the sale. © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

  JOSH BURLEY, 301-881-8900 x125

If you are first-time homebuyer who has put off getting into homeownership, you only have a few short weeks left to take advantage of a fabulous incentive: the $8,000 first-time homebuyer credit.  Because the purchase must close before December 1, you can’t delay any longer. Mortgages are taking over a month to process these days, so don’t expect to wait until November and still qualify. 

The credit is 10% of the cost of a home, so a house costing as little as $80,000 is enough to qualify for the full credit.   Since the credit is refundable, the government will pay you the difference if your tax liability is less than your credit amount.  Unlike the first version of the credit, you don’t have to pay it back.  There is an income limit to qualify for the credit.  You must have “modified” adjusted gross income (MAGI) of $150,000 or less if you are a couple filing a joint return, $75,000 or less if you’re single to get a full credit. 

To be a “first-time homebuyer” you may not have owned a principal residence in the three years prior to the date of purchase of the home for which the credit is being claimed.  First-time homebuyers are flocking to FHA mortgages because of their low downpayment requirements (a minimum of only 3.5%) and more liberal loan qualification standards.  Making the first-time buyer credit even more attractive is that FHA is permitting the credit to be advanced to a purchaser to cover closing costs, an interest-rate buydown or to increase their downpayment beyond the 3.5% minimum. 

The advance can be paid off in one of two ways: the anticipated credit can be purchased by one of several qualified parties (lenders, certain non-profit agencies or government units) or through a second lien on the property.  In the latter case, FHA has some specific rules about the second lien structure. Talk to your Realtor or mortgage professional about how these rules might affect your purchase.  Could the credit be extended, even expanded? Possible.  But the current climate in Washington is to nix more stimulus spending and programs that add to the budget deficit, so we think an extension is a long shot, at best. 

So, with home sales climbing and prices stabilizing in many markets, this looks to be as ideal a time for a first-time homebuyer to get it the game as they may ever see.  © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

Alex Echeandia, Maryland loan officer

When am I eligible to drop my MI?
Many people want to know what the best way to get rid of mortgage insurance.  If you want to avoid PMI altogether, you must put 20% down when you purchase the property. Somewhat recently, people could get a 2nd mortgage for that 20%, but many lenders have done away with “piggyback” loans so more people are now buying homes and paying PMI because they are not able to come up with the 20% down.

If you only put 5% down and are now wondering when they are able to get rid of PMI, the answer is when you reach a point where you think you have 20% equity in your property. You should then contact your mortgage servicer. They will be able to tell you what their requirements are and will usually send you a package of instructions that involve getting an appraisal and completing some forms. Many assume that once 20% equity is reached, that there lender will drop the PMI automatically, but that is most likely not the case. When dropping PMI, the factors that your lender will consider are the current value of your home and if you’ve made your mortgage payments on time. Be sure not to spend the money ordering an appraisal to determine your property value until you have spoken with your lender about the process.

If you have an FHA loan — two things must happen in order to cancel mortgage insurance — the UFMIP account must be depleted completely (this takes 60 months from when you took out your loan) and you must have paid down the principal to 78% of your original loan balance. FHA monthly mortgage insurance does not take in to account any property appreciation that may have occured.

Bob Kearns of Choice Finance^®

Updating a home can be an expensive proposition. Sometimes it is almost impossible to accomplish without some type of loan. If you or a family member happen to be a Veteran, it is possible to qualify for a VA home improvement loan. Taking out and using the equity in ones home can actually help increase the value depending on the improvements made.

Being a Veteran and taking advantage of getting a VA home improvement loan comes with many advantages. For one, most financial institutions do not require cash down payment for VA loans. There can also be the added benefit of no charges if the balance of the loan is paid off early. Additionally, some of the most competitive rates are those offered on VA loans.

Especially for large improvement projects such as roof repair or window replacement, applying for and receiving a VA loan if you qualify can save a bundle of money. These types of loans are guaranteed by the Federal Government to lenders specifically for veterans. The money for the lender is guaranteed, therefore, financial institutions are more apt to loan money.

Many veterans who use the VA Home Loan Guarantee Program to purchase or refinance their homes want to make home improvements. Even if you are buying a pre-existing home, there may be certain improvements you will want to make right away to save on utility bills or make the house more energy-efficient. When you purchase or refinance a home through the VA Home Loan Guarantee Program the VA is willing to finance the cost of your energy-efficient home improvements into your loan, so that you will have money available to make your home improvements now.

The VA will allow you to finance money for energy-efficient home improvements into your new mortgage loan or refinance mortgage loan as long as the money is used to pay for one of the following home improvements:

• Heat pumps
• Thermal or storm doors and windows
• Energy-efficient furnace purchase or efficiency modifications to your existing furnace, this means that you can purchase a new furnace or convert the one you already have to make it more energy-efficient.
• Water heater insulation
• Clock thermostats
• Solar cooling systems
• Solar heating systems
• Insulation in the home, including insulation in the floors, attic, walls, and doors

Bob Kearns of Choice Finance^®

When I meet people and they find out what I do for a living I usually get two questions, “what are rates like”? and “how are home sales”? After a few years of less than positive answers I finally have at least some good news to report. 

It’s still a mixed bag out there but since Jan 09 sales have risen and inventory has fallen in DC, MD and VA. Now there are differences in all three areas and even in a county there are still HUGE differences from city to city.  Let’s look in general at the entire Metro area for now. Last June there were over 51,000 thousand homes for sale and less than 7500 sales. What a difference a year makes. The amount of homes for sale has dropped from over 51,000 to just under 39,000 in about a year. Days on market have decreased in most areas also though the further out you get such as Frederick and Anne Arundel the time to sell a home is still in the triple digits.

Counties like Montgomery that are even partially within the Beltway are doing much better with marketing times less than 100 days. The exception is PG which has seen very sluggish homes sales and a very steep drop in prices from top to bottom. The problem there stems from a larger glut of foreclosures than other parts of the area. Until that back log is slimmed down that will stay the way it is. Also MD hasn’t recovered yet in general when compared to VA. Virginia had the drop in their market first especially Loudon and Prince William and logically has been the first to come back. MD will come back but in my opinion not this year. 

The trend that has continued though is that while homes may be selling a bit quicker these days we are still seeing prices down from the peaks of a few years ago. In most areas this trend has been occuring for years of course but we have seen very steep drops this year even more than 2008. I have a feeling that we will continue to see futher price drops as the foreclosures and short sales will still plauge us into 2010.

Banks aren’t willing to work with homeowners enough to assist homeowners who are underwater or are stuck in high interest rate loans like an ARM that will reset in the next year or so. Loans that have PMI on it are apparently unable to refinance because MI companies aren’t willing to make new committments even though they already have these people on their books. Of course many of these companies are out of business because of all the debt from all the toxic loans they made in the bad old days. 

If some of these ARMS reset now people could actually see their rate drop but this is likely to be a temporary fix.  As our population grows this will slowly even out but this is a longer term fix. Keep an eye on the inventory of homes on the market and sales because in the end that will determine when prices rise across our region.

Brent Mendelson, Choice Finance

Dear Mortgage Client

I want to make sure you are aware of the recent appraisal changes in the mortgage industry as a whole.  While these changes don’t alleviate the frustrations Lenders and their borrowers are all having as a result of this new process, they do shed some light on why things are taking so long.

There have been many Newspaper reports recently on the Home Valuation Code of Conduct (HVCC). This is an agreement between the Attorney Generals office in New York and Fannie Mae and Freddie Mac which has affected the appraisal process in every state across the country not just New York.  The Code stipulates that Fannie Mae and Freddie Mac will no longer purchase mortgages where the appraisal was ordered, reviewed, commented on, or in any way had the originator directly involved in any part of the appraisal process.

As you can imagine, this is a huge impediment on the mortgage approval process.  Because of this new Code, we are all left in the dark somewhat…  The underwriters of the loan have to address any appraisal needs through 3rd party Appraisal Management Companies which delays the entire application review.  This system is also using out of area Appraisers who are coming in with low values.  A Baltimore appraiser should not be appraising anything in Montgomery County. 

While we have great relationships with our wholesalers, we work very closely with them to extend lock commitments when necessary. Unfortunately, the HVCC has delayed thousands of settlements and has cost consumers millions in lost locks and higher appraisal fees. It has extended normal underwriting times from days to weeks.  Sometimes inhibiting your loan officer’s ability to time the market for rate locks.  We are doing everything possible to move applications through the proper channels as quickly as we can.

Here is a Call to Action by the NAMB, our industry association. You can see from reading this material, this is a problem everywhere with every loan file. Hopefully, they will overturn the Code, reinstitute our ability to order and review appraisals very soon.

You can help by contacting your local Representative TODAY.
Click here to locate your local Rep.

As many housing market experts had predicted, with the growing number of Americans reaching retirement age, reverse mortgages are gaining popularity.  The FHA approved over 118,000 Home Equity Conversion
Mortgages, the most widely used reverse mortgage product, in 2008.

The reverse mortgage gets its name from the fact that the stream of payments is reversed.   Instead of making monthly payments to the lender, as with a regular “forward” mortgage, a lender pays you.  A reverse mortgage enables older homeowners to convert part of the equity in
their homes into tax-free income without having to sell the home, give up title, or take on a new mortgage payment.

In at least one sense, they are especially big this year because the maximum size of the FHA HECM has been raised from $417,000 to $625,500 for 2009.  And with a new program available for the first time this year, a reverse mortgage can be used to purchase a primary residence (see shaded box at right for more)!   The amount of funds a person is eligible to receive depends on the age of the youngest spouse, appraised home value and current interest rates.  The older you are and the more equity you have in your home, the more money you can get.

Reverse mortgages make a lot of sense for many homeowners, especially those who have diminished incomes in retirement. However, they aren’t for
everyone. If you are thinking about initiating one, we strongly urge that
you include a financial advisor and family members in the discussions.

Who qualifies for a reverse mortgage?  First, all owners on the title must be over 62. If you have a spouse who is over 62 and is not on the title, you need to think about adding him or her.  Second, you must own your home free and clear or have a small enough mortgage balance that it can be paid off at closing with proceeds from the reverse mortgage.

What are the options for getting the money?  Depending on the particular reverse mortgage program, the options include: (1) as a fixed monthly payment either for a set term or for as long as you live in the home; (2) as a line of credit; (3) as a lump sum; or (4) a combination of the three.

How can the funds from a reverse mortgage be used?  There are no
restrictions on how you use the money, but good judgement should be
exercised.  Some typical uses are: eliminate mortgage payments; supplement retirement income to cover daily expenses; repair or modify your home for health needs; pay off bills; pay for health expenses; underwrite your grandchildren’s college expenses; pay property taxes; avoid foreclosure. 

Does a reverse mortgage affect my current government assistance, retirement benefits or estate plan?  A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, reverse mortgage proceeds that are banked could be counted as an asset and affect eligibility.  With respect to the impact on your
estate, since you still own the home, any equity that remains after death goes to your heirs. You can never owe more than the value of the home. Even if the proceeds received exceed the value of the home, your heirs would not be liable nor would other assets be attached. 

How is the loan paid back?  No payments are due on a reverse mortgage
while it is outstanding. The loan is repaid when you cease to occupy it as
a principal residence, when you or the last remaining spouse pass away, sell
the home or permanently move out.  The definition of moving out is twelve
months of non-occupancy. 

What are the negatives of a reverse mortgage?  Upfront costs for a reverse mortgage are substantial. A HECM will come with origination fees of from $2,500 to $6,000, a 2% mortgage insurance premium, plus many of the closing costs that would be associated with a home purchase. If you plan to stay in the home for less than four to seven years, there may be better options, such as a home equity loan or cash-out refi.  You will be consuming the equity in your home. If your goal was to leave the home debt-free to your children, that can no longer happen. If that was your aim, you need to sit down and conduct a frank discussion of your financial situation with your family to discuss alternatives for your needs. 

Before you can be approved for a Home Equity Conversion Mortgage, you must complete a counseling session with an FHA approved counselor.
For more unbiased information on reverse mortgages, check out the AARP
web site at http://www.aarp.org/money/personal/articles/reverse_mortgage_basics.html.  © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

Alex Echeandia, Choice Finance

The newest wrinkle in reverse mortgages is that they can now be used to purchase a principal residence under the FHA Home Equity Conversion Mortgage (HECM) for Purchase program.

How does HECM for Purchase work?
-The purchaser(s) must be 62 or older. 
-The appraised value of the home (or contract price if it is less) is subjected to a discounting calculation based on the age of the purchaser(s)
and the current interest rate.  The result is the “principal limit,” which is
the amount available under HECM for a purchase.  The older the purchaser(s), the higher the limit.
-The principal limit cannot be greater than the general HECM limit of
$625,500 for 2009.
-The difference between the principal limit and the purchase price plus the
program fees (which will run to 7% and up), must be made up by the
purchaser.  This essentially constitutes the downpayment on the home.

For example, on a home that sells and appraises for $300,000 and has a
principal limit of $195,000 and fees of $21,000, a purchaser would have to
bring $126,000 to the settlement table.  This might seem like a big cash
commitment, but consider the benefit: it enables a purchaser who has substantial assets (such as from the sale of a previous home), but
income that might, otherwise, be insufficient for a home purchase, to
buy a house and have no mortgage payment for life!

While a credit score is not required, the lender will want to determine that
there are no financial obligations, monetary judgments (including any
on a non-borrowing spouse) or liens that could jeopardize the HECM lien
and compromise clear title.  If you choose, you can provide a larger
investment amount in order to retain a portion of the available HECM proceeds for future draws.

Taxes, insurance and any repairs remain the purchaser’s responsibility to pay.  Understand, FHA is very careful about determining the source of purchaser’s assets for the required investment, so they will insist on verification of the sources of these funds. 

Bridge loans and other gap financing methods can’t be used to meet the cash investment requirement or pay closing costs nor can subordinate liens, personal loans, cash withdrawals from credit cards, or seller financing.

Borrowers can use the HECM for the Purchase program on a new primary
residence while retaining their existing home as a rental property.  Lenders will need proof of income sufficient to pay mortgage payments, taxes, insurance and maintenance. 

HECM for Purchase applicants have to undergo counseling with a FHA approved counselor.  © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

Josh Burley of Choice Finance®

The Treasury Department has announced an expansion of its Making Home Affordable Program aimed at encouraging loan modifications for struggling homeowners with second liens.  The original version of the program did not address situations where homeowners had second liens, such as where a purchaser used a piggyback second mortgage to reduce the need for a downpayment. 

Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified, Treasury found.   Treasury estimates that up to 50% of at-risk mortgages have second liens.  By offering homeowners a way to lower payments on their second, Treasury said it may potentially reduce payments further for up to 1 to 1.5 million homeowners with second mortgages. 

Under the new program for second liens, when a modification is initiated on a first lien, servicers participating in the second lien program will automatically reduce payments on the associated second lien according to a pre-set protocol.  Treasury will enter into agreements with second lien holders to reduce interest rates for five years to 1% on fully-amortizing second liens and 2% for interest-only seconds.

Treasury will also pay second lien servicers for modifying a loan and a
bonus for each year the homeowner stays current on the payments
As an alternative, servicers will have the option to extinguish the second
lien in return for a lump sum payment under a pre-set formula determined by Treasury in cases where extinguishment is most appropriate.

Under the plan, whenever first mortgage holders cut a borrower’s principal
balances by a percentage of the loan amount, second lien holders will be
required to reduce balances owed by a similar percentage.  Stressed homeowners with second liens should call the servicer of the
lien to see if help is available under the program.  © 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

It might have been better to have titled this article “Condos for Cash,” since it seems that all-cash might be the only guaranteed way to purchase a condo today.  Simply put, if you are interested in buying a condominium in today’s market, be prepared to face some substantial financial hurdles. 

The problem now lies with the speculative growth that took place during the
last real estate boom.  Apartment buildings were converted at an incredible rate to take advantage of the demand and sold at exorbitant prices.  When the market sagged, it affected developers who were building new units. Since a condo owner is also a joint owner of all the common areas, any sizeable drops in ownership due to people not going through with their
contracts, being foreclosed on or sales coming to a halt hurts the cash flow
(since condo dues are not being paid) needed to pay the association’s bills.
As this economic stress began to impact condo communities, its effects
have been disastrous for their financing.  Almost all mortgage insurance companies are now refusing to insure any condo loans and Fannie Mae and Freddie Mac have tightened their rules considerably, making financing very hard to obtain. 

So how can you buy a condo?  First of all, all-cash transactions will always work and you can negotiate some incredible deals in today’s market due to the enormous supply and lack of buyers. However, this is generally a
path reserved for well-heeled investors. 
If you finance the purchase, here are your current options: 
FHA- This is the only option if you have limited funds since FHA only
requires a 3.5% downpayment.   However, the condo project has to be FHA/
VA approved and this approval list can change rapidly.  The key requirement for FHA/VA approval is the size of the investor concentration in the project.  The higher the percentage of non-owner occupants (renters), the greater chance that the project is not approved or is in danger of losing its approval.  The reason the number changes is that, in a slow market, if you can’t sell the property you may have to rent it in order to stay current on your mortgage. 

Conventional Financing Financing- You will have to make at least a 20% downpayment and pay a premium (rates will be higher due to the perceived risk) in order to get the mortgage.  Fannie Mae also has rules regarding investor concentration.  But Fannie Mae also monitors the type of development you are buying in (mixed-use projects that have a non-residential component are not eligible), seller concessions and the percentage of units already sold and settled.  A seller will have to provide an incredible amount of documentation to satisfy both Fannie Mae as well as the underwriter. 

Financing Developer/Seller Financing- Where one party is eager to sell, many options are always available.  Developers may well be able to offer below-market financing from the bank that provided the construction loans. Here, everyone has an interest in making things work. 

If you are thinking about buying a condo, extra due diligence is required, so you will need to:
• Find a Realtor who is knowledgeable about condos and who you can trust.
• Closely analyze the financials that must be provided to you before the
contract can be ratified.  Be especially careful if the development
lacks adequate reserves for future maintenance (parking lots will have to
be repaved), has a large number of delinquent condo dues payers or has
too many units on the market.  Today’s approved project may be tomorrow’s casualty.
• Don’t give up hope. Many good developments are being affected
through no fault of their own.  Bargains are there but purchasing one will
require some extra effort on your part.
• These purchases and loans will take longer to process and
complete.© 2007, Real Estate Information Services, Capitol Assets & Choice Finance®

Buying a condo?  Call me, Alex Echeandia