Condos are now more FHA friendly

Starting today, October 15, 2019, it will be possible to buy a condo using an FHA loan even if the condo project (building or complex) does not have FHA approval.

E 6th street
E. 6th street – mears park

Up until now, FHA loans could only be used if the condo project was approved for FHA financing. Approved condo buildings are rare in St. Paul.

There are some rules it isn’t like you can buy any old condo with an FHA loan.

“As of October 15, FHA will insure mortgages for selected condominium units in projects that are not currently approved.  An individual unit may be eligible for Single-Unit Approval under the following conditions:

  • The individual condominium unit is located in a completed project that is not approved;
  • For condominium projects with 10 or more units, no more than 10 percent of individual condo units can be FHA-insured; and projects with fewer than 10 units may have no more than two FHA-insured units.

Minimum Owner-Occupancy Requirements

FHA will require that approved condominium projects have a minimum of 50 percent of the units occupied by owners for most projects.

FHA Insurance Concentration in Condominium Projects

FHA will only insure up to 50 percent of the total number of units in an approved condominium project.”

If you are buying a condo and wish to use an FHA loan talk to your lender. What is an FHA loan? Short for “Federal Housing Administration” These loans require less of a down payment.

If you own a condo this means that there may be a larger pool of qualified buyers. If you would like to buy a condo you may be able to do so with an FHA loan. Feel free to contact me if you are interested in selling your condo or in buying one.

Saving up for a downpayment

Experts generally agree that being able to put a little money aside or save it is important. There are people who earn above-average incomes but who have no money.

Skipping the fancy coffee is’t going to add up to enough savings for a down payment on a house, it is going to take more than that.

Knowing where your money is being spent can help. Often it is the smaller monthly expenses that really add up.

A cell phone bill here and a streaming service there and some magazine subscriptions and maybe a membership that rarely gets used.

Go through monthly expenses at least once a year and see if any of the bills can be lowered or eliminated. Look for free trials that ended up being monthly bills.

It is possible to make savings a monthly expense by using auto-pay to transfer money from checking to savings each month before it all gets spent. Based on the idea of paying yourself first.

The word budget sounds boring but it is easier than ever thanks to electronic banking. I like to categorize expenses so I can easily see how much is being spent on utilities or restaurants.

Cooking at home can save a lot of money. When my daughter was a starving graduate student she used to do most of her cooking for the week on Sunday afternoons because she didn’t always have time to cook.

Bringing lunch to work can be a significant saving over dining out each day.

Buying a house does not require a 20% downpayment but in most cases, homebuyers will need cash. For those who already own a home sometimes things break.

People who want to buy a house in 2021 should start saving today.

Low interest rates getting lower?

Interest rates may go down a bit again but right now they are super low. Here are some numbers from Freddie Mac

graph
Rates Freddie Mac
interest rate chart
Interest rates 9/2018

I know from experience that when rates go up the smallest amount seems to affect home sales. When they go down people start refinancing.

Will rates go down again this week? We shall see.

Take advantage of lower interest rates

I didn’t want to publish this on April fools day because I was afraid that people would not take it seriously. Here is a look at mortgage interest rates:

By historical standards none of the rates on the chart below are high but rates were higher and have gone down making buying a home just a little more affordable.

Mortgage Rates

Where is the money?

Most home buyers use some kind of financing to buy a home. Over the last 15 years or so the home buying process has changed because

Roofs

of technology. The shopping process is easier because of the internet. It is easier to do some research and to learn about real estate and about a particular home. There are online home valuations and information about what the previous owner paid for the home and more.

The process of getting a loan to buy a home hasn’t changed much and most of it is shrouded in mystery. Home buyers fill out forms like crazy and send information to the lender.

Once a buyer has a contract to purchase a home the process goes into a kind of black hole. The property is appraised and the process goes to “underwriting”. Sometimes we get to talk to the underwriter but most of the time we don’t get to and they always seem to be on vacation the week of the closing.

When I work with home buyers or sellers I have no control over the mortgage process and a big part of my process is to constantly ask for updates. It seems like it all works out most of the time.

During the great recession and housing market crash financing “fell through” a lot more often than it does these days.

Often when something does go wrong it is people like me who become the “face” of the purchase and end up absorbing the blows and explaining what went wrong even though we do not have any control over the process.

Working with a loan officer who doesn’t return phone calls or give updates can turn a positive home buying or selling experience into a hellish one.

I am looking forward to the day when consumers will start to benefit from today’s technology when they want to borrow money. A day when the process is transparent and the consumer is in charge. There is plenty of room for better customer service in mortgage and finance.

Chose your lender wisely. Get recommendations from real estate agents and friends, relatives, neighbors and co-workers who have recently purchased homes.

Closing costs and fees and stuff

Getting an offer accepted for the purchase of a home is just one step in a process. The purchase price of the house is actually more than the amount the buyer offers when closing costs are factored in.

Real estate agents don’t create closing costs. There is a state mortgage registration tax of0.0023 and them add on another .0001 for the state environmental response fund.

Some real estate companies tack on an extra few hundred and there are closing and lending fees, and a loan origination fee. There are prorated property taxes and an insurance binder.

Real estate agents who work with buyers get paid by the listing broker, who gets paid by the seller, but not until the sale closes.

There are some who say a buyer’s agent services are free and others who contend that the fee is baked into the price of the house. Either way, a buyers agent can be a great investment if she has a lot of experience, can save you money and help you make a wise choice when buying a house.

Home buyers using any kind of financing will get a good faith estimate that shows fees and closing costs. These good faith estimates must closely match the settlement statement the buyer will receive three days before the closing.

Home buyers should ask their mortgage professional how much cash they will need in addition to the down payment to cover closing costs.

Sometimes buyers finance their closing costs by having them rolled into the loan. Sometimes buyers ask sellers to pay the closing costs which doesn’t work well in multiple offer situations.

There are programs that offer assistance with downpayment and closing costs. I had one client this summer who brought a couple hundred dollars to the closing. The rest of the funds came from a kind of low-interest second mortgage.

The buyer has a place to live for less than what he would have to pay for rent and he still has funds in his savings account.

water lily – at Como Park