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Getting mortgage financing to buy a new condo can be incredibly difficult.
The main reason why’s it’s challenging is because the condo project has to be “approved” by Fannie Mae, the federal government supported agency repsonsible for providing money for mortgage financing.
In order to get “approved” by Fannie Mae, there is a number of mortgage underwriting criteria that have to be met.
For example, there cannot be a high investor concentration in the condo, no pending lawsuits, a low percentage of delinquencies on the condo dues, among other criteria.
The way a mortgage underwriter gets this information is that a condo questionaire is sent to the condo property mananger and the property manager will complete the condo questionaire. All it takes is one “wrong” answer to kill the deal.
So when buying a condo, not only does the buyer have to get a mortgage credit approval, but the condo project itself has to be approved.
One solution or workaround to the condo mortgage financing problem is to put at least 25% down payment.
When there is 25% downpayment on the condo, most lenders do not to need a full mortgage condo questionaire, eliminating the chance that the condo won’t get approved.
Here’s the takeaway: if you’re buying a new condo, if you can put at least 25% down payment, do so.
This will eliminate the need for a full mortgage condo questionaire and the possibility that the condo won’t be approved for mortgage financing, saving you much time and potential headaches.
The Florida Down Payment Assistance Program – also known as the Flordia Bond Program – allows first-time homebuyers to purchase a new primary residence with as little as $1000 down payment.
The Florida Bond money, which has been increased to $10,000, will cover the remaining down payment plus be used to cover your closing costs!
Here are some qualifying details:
1. You need a credit score of 640 or higher.
2. Your total monthly debt (including your proposed house payment with property taxes and insurance) can’t exceed 45% of the gross monthly income.
3. Your household income for 2 adults can’t exceed $82,440 (in Palm Beach county Florida.) This number varies according to the county the property is located in. In addition, this number can increase depending on whether there are dependants living in the household.
4. You need at least $1000 of your own money as a down payment.
5. You cannot have owned real estate for the last 3 three years.
6. You need to complete a first-time home buyer class and receive a first-time homebuyer certificate.
If you believe you meet Florida Bond criteria and can qualify for the Florida Down Payment Assistance Program or if you have any questions about the Florida Bond Program, feel free to contact me at 561-379-8013.
The first time home buyer is required to put at least 3% as a down payment on the home and obtain a mortgage for the remaining 97%.
The Florida Bond Program will provide down payment assistance to “cover” whatever is required over and above the $1000 down payment. In addition, the $1000 can come in the form of a gift.
For example, if the home purchase price is $135,000, 3% of that amounts to $4050. The first time home buyer will put down $1000 and the Florida Bond will cover the remaining $3050.
The Down Payment assistance only gets repaid when the home is sold and the first time home buyer is charged 0% interest. No interest accrues and no payment is required!
In addition, if the Florida Bond money exceeds the down payment required, it can be applied towards the first time home buyer’s closing costs.
A couple quick items: the borrower’s income has to be less than 80% of the median income for the county in which the property is located. An exception to that is if the property is located in a designated bank “target” area. If the property is located in that taget area, there is no limitation on the first time home buyer’s income.
If you are a first time home buyer, you ought to see whether you qualify under the Florida Bond Program as this will allow you to purchase a new home with little to no money out of pocket and the money that you’re given as Down Payment Assistance doesn’t have to be repaid until the home is sold and no interest is charged against you.
The Florida Bond Program can only be accessed through certain mortgage banks. Citibank is one of them.
For those of my Florida Realtor friends who have asked about the details of the Florida Down Payment Assistance Program (also known as the Florida Bond Program), well here they are:
The Florida Housing Bond Program is a first mortgage program that also offers down payment and closing cost assistance to first time home buyers. The mortgage rate and term is determined by Florida Housing.
The requirements of the Florida Down Payment Assistance Program include:
- You must be a first time home buyer.
- A first time home buyer is someone who hasn’t owned a principal residence in the last 3 years. There are 2 exceptions to this rule. The first is that if the property is located in a specific bank designated area and second is if the borrower is a Veteran and applies under the Heroes Earning Assistance Act of 2008.
- If the property that you own is a rental and not your primary residence, you would be eligible for the Down Payment Assistance Program.
- All first time home buyers have to go through a Home buying education class.
- The minimum credit score required is 640 and the maximum debt to income ratio allowed is 45%.
- The minimum first time home buyer down payment is $1000! This is less than what is required to rent! The $1000 can be a gift.
- There are 3 mortgage options: Florida First Government Mortgage loan (FHA), Florida First Conventional Mortgage loan and Florida Military Heroes VA.
All of these loan types are 30 yr fixed mortgages.
The Florida Down Payment Assistance program allows a first time home buyer to purchase a new home with as little as $1000 out of pocket. This is less than it would cost to move into a rental unit.
For those first time home buyer’s who qualify, the Florida Down Payment Assistance Program can’t be beat.
Homeowners are still wanting to take cash (or equity) out of their homes for whatever reason – debt consolidation, home renovation, college tuition, etc.
Many people I talk to want to add a second mortgage to gain access to that home equity.
They are under the impression that a fixed rate second mortgage is free and the mortgage rates are the same as those advertised for the 30 year fixed mortgages, for example.
They are mistaken, however.
The underwriting criteria is virtually the same for a new fixed rate second mortgage than the criteria used when underwriting a new first mortgage.
So the “hassle factor” for the borrower is the same.
So why not replace the first mortgage with a new first mortgage and take the cash out at the same time?
It makes sense as long as the mortgage rate is dropping or the loan term is being reduced.
In addition, a homeowner can get a new first mortgage with the lender paying the third party closing costs.
This can be a pretty good deal.
What about a home equity line of credit also known as a HELOC, instead of a fixed rate second mortgage? Would that be a better option?
It depends on when the homeowner needs access to the cash.
If you don’t need the cash immediately and just want “access” to your home’s equity, then a HELOC would make sense.
With a home equity line of credit HELOC, the homeowner is billed only on what they use.
It works like a credit card - zero balance, zero payment.
Note however that the home equity line of credit is a variable rate mortgage (yes, it is a mortgage) and is tied to the Prime Rate, which currently is at 3%, very low indeed.
However, the Prime Rate can increase and was as high as 8% 5 years ago.
In conclusion, it may make more sense to do a cash out refinance with a new first mortgage and take cash out instead of putting on a new fixed rate second mortgage.
This is a great question and one that many people think about.
You see the mortgage rates and they’re really low. You know that the mortgage rates are lower than what your current mortgage rate and your friends are telling you that they just refinanced their mortgage at such and such mortgage rate.
You’re thinking, “I better get on the wagon so I can save some money”!
So you do your research and see the mortgage rates, the new proposed mortgage payment and you’re ready to move forward and apply for the mortgage loan refinance.
Here comes the work.
The first thing you’ll need to do is complete a mortgage loan application.
You can do this face to face with a mortgage broker or loan officer, over the telephone or even online.
It takes about 15 minutes to complete a mortgage loan application.
Next, you’ll need to dig up your income and asset paperwork.
Unfortunately (or fortunately), depending on how you view it, there are no more “no documentation” loans available for mortgages.
Specifically, if you’re employed, you’ll need copies of your last 30 days pay stubs, copies of your last 2 years W2s and copies of your last 2 months bank statements or a quarterly brokerage account statement.
If you own rental property or if your self employed, you’ll need to include copies of your last 2 years tax returns as well.
All pages, all schedules.
In addition to the income and asset paperwork, you’ll need to supply copies of your photo id, a copy of your homeowners insurance declaration page, and a copy of your current mortgage statement.
Finally, there will mortgage loan disclosures that you’ll have to sign and send back to the lender.
So, there it is – the list of paperwork you’ll need to supply to refinance your mortgage.
For some people, it’s a hassle to dig it up and provide it.
For others, not so much.
If you’re going to save thousands of dollars by lowering your mortgage rate, isn’t it worth the hour or so in time it’ll take to complete the mortgage application and locate and provide the supporting paperwork?
Whenever a person applies for a mortgage loan, whether to refinance an existing mortgage loan or when buying a new home, the mortgage lender is required to provide a Good Faith Estimate of costs.
After all, the transaction isn’t free.
Let me begin by outlining the 4 parties involved in the mortgage transaction.
1. The mortgage lender
2. The title company
3. The home appraiser
4. The county clerk’s office who records the mortgage
These parties all do work to complete the mortgage transaction and they get paid for their work.
Now, they are all independent.
The mortgage lender doesn’t control the mortgage transaction exclusively; however, the mortgage lender is required to estimate what the other parties (i.e. title company, appraiser, county clerk’s office) will charge for their work.
When the mortgage lender prepares the Good Faith Estimate of costs, they are estimating what the third parties will charge.
In the old days, prior to April 2010, the mortgage lender wasn’t responsible for underestimating the third party fees.
Why does this matter – you ask.
It matters because in the “old days” some unscrupulous mortgage lenders would deliberatley underestimate the third party fees to make the bottom line closing cost figure look low in an attempt to show that they are cheaper than the competition.
When the borrower would get to the closing table, they would see their closing costs are higher. Whoa.
They would call the mortgage lender and complain while at the closing table, saying the costs are higher than what was represented on the Good Faith Estimate.
The unscrupulous mortgage lender would respond saying they estimated the third party fees - that they aren’t the mortgage lender’s fees. Oops. Sorry for the mistake.
Fast forward to present day.
Now, mortgage lenders are responsible for accurately quoting third party fees on the Good Faith Estimate.
Specifically, they are given a 10% tolerance threshold when estimating third party fees.
What this means is that if the Good Faith Estimate shows third party costs at $1000 and at closing the borrower sees the third party fees at $1500, there’s a problem.
The the mortgage lender, under this scenario, is allowed to make a mistake on third party fees up to $100 or 10% – any amount over that 10% has to be refunded to the borrower.
So, let’s says the Good Faith Estimate shows third party fees at $1000 but at closing the third party fees amount to $1500.
The mortgage lender is allowed a 10% or $100 mistake which would bring them to $1100. The $400 difference has to be refunded to the borrower.
In conclusion, when getting a Good Faith Estimate of costs from your mortgage lender, know that the third party fees listed at closing on the HUD-1 Settlement Statement cannot be more than 10% of the third party fees listed on the Good Faith Estimate.
Any amount over that is due to be returned to the borrower!
There are positive changes ahead for the FHA streamline refinance guidelines!
Beginning June 11, 2012, FHA is changing (i.e. loosening) their FHA streamline refinance guidelines, making the FHA streamline refinance a smart refinance option for homeowners.
Let me explain.
If you currently have a FHA mortgage and want to refinance the mortgage using the FHA streamline refinance program, you’re going to have to pay higher UFMIP (upfront mortgage insurance premium) and a monthly MIP (monthly mortgage insurance premium).
FHA, which stands for the Federal Housing Administration, increased the premiums collected on all FHA mortgages beginning April 2010 because FHA needed to replenish it’s mortgage insurance premium reserves.
(I’m guessing with the increase in FHA mortgage defaults, FHA had to pay out a number of claims, dropping the mortgage insurance reserves they held.)
FHA, beginning June 11, 2012, is lowering the UPMIP to .01 % of the loan amount and the monthly MIP to .55%.
That means instead of paying 1.75% in UPMIP which would amount to $1750 on a $100,000 mortgage, for example, the UPMIP is reduced to $1000.
Similarly, the monthly mortgage insurance premium would be reduced to $45/month under this scenario, no matter what the mortgage loan to value ratio.
This is good news for homeowners who currently have an FHA mortgage and want to refinance the mortgage but can’t because they aren’t saving money under the “old” FHA streamline guidelines.
The mortgage rates are very low, but if you have to pay a high monthly MIP, it wipes out the monthly savings.
Now homeowners with FHA mortgage can refinance into a FHA streamline mortgage and save money as the UPMIP and monthly MIP premiums will be lowered.
There are certain requirements however.
Here they are:
You have to be current on your existing FHA mortgage and the FHA mortgage had to be endorsed by FHA before May 31, 2009.
To be endorsed by FHA means the date FHA endorsed you for insurance coverage, not your close date.
This usually takes place within 60 days from your mortgage close date.
To check your endorsement date you can call FHA at 800-697-6967 or the FHA Resource Center at 800-225-5342, Monday – Friday 8 am to 8 pm ET.
So, good news beginning June 11, 2012 for homeowners who currentrly have an FHA mortgage.
If you qualify, you can a refinance your existing FHA mortgage into a FHA streamline mortgage and potentially save thousands of dollars by not paying current (and higher) FHA UPMIP and monthly MIP premiums!
This is the 64 thousand dollar mortgage question.
Mortgage rates are remarkably low and I’ve written about this for a while now.
But looking into the crystal ball, what do I see for mortgage rates?
While no-one can predict with certainty (it’s kind of like predicting the price change of a stock), we can make an educated guess about whether mortgage rates will continue to drop.
Generally speaking, as the United States economy remains weak, mortgage rates will remain low – even at these low levels.
As of this morning, home prices for the first 3 months of 2012 hit new lows across the country. Nationally, home prices are at 2002 levels.
There are little signs of inflation in the economy, which are keeping mortgage rates low.
There is unease in European and US stock markets about Greece’s part in the European Union, which has caused more money to flow into mortgage bonds, keeping mortgage rates low.
In conclusion, as long as there is unease in the equity (or stock markets) combined with a weak US economy, mortgage rates will remain at these low levels.
We may see them creep up or down a quarter of a point or so, but generally speaking, mortgage rates will stay low as long as there is no inflation in our economy and investors remain unsure about investing money in stocks.
If you haven’t considered refinancing your existing mortgage loan into a lower mortgage rate or shorter term loan, now is the time!
“Is a home appraisal required when refinancing a home mortgage?”
I get that mortgage question every now and then.
Here’s the answer.
If your current mortgage loan is a FHA mortgage, then you may be eligible for a FHA streamline refinance without an appraisal.
This is beneficial from the standpoint that you can lower your mortgage rate and mortgage payment and not have to deal with the loan to value guideline that you would face if a home appraisal was needed.
Also, you save yourself about $375, which is the rough cost of a new home appraisal.
If you’re in a conventional mortgage and want to refinance into a new mortgage loan, then in all likelihood, a new appraisal is needed.
The way this is determined is that when the mortgage application is initially underwritten by an automated underwriter (which is a mortgage underwriting software), the automated underwriter will do an electronic valuation to get an idea of the home value.
If the automated underwriter determines that there is sufficient equity in the home, then a new home appraisal may be waived.
Mortgage lenders, however, at their discretion, can require a home appraisal despite an electronic appraisal waiver.
The home apprisal is critical in the transaction as it verifies the current home value and condition of the home, which is the mortgage lender’s collateral.
In conclusion, when refinancing a convenional mortgage, a home appraisal will – in all liklihood – be required.
Sometimes, you may be given an appraisal waiver if it’s determined by the automated underwriter that there is a lot of equity in the home.
Also, if you currently have a FHA mortgage, you may be eligible for a FHA streamline refinance without an appraisal.