Tag Archives: fha financing

Are You Planning On Getting An FHA Loan What You Need To Know

 

David asks…

Does anyone know of any upcoming FHA guideline changes?

I am suppose to be getting FHA. Just worried cause there is so many things going on with the market that in a few weeks it may be impossible to get a loan.

admin answers:

One of the major changes that FHA has done in recent years is the change in how the principal mortgage insurance ( PMI) now works when getting a home loan.  As of June of last year 2013 if you were getting a FHA home loan and were planning only putting down the required 3.5%.  The PMI would be for the life of the loan.  This is a huge difference since it use to be that after 5 years the premium that you were paying for the insurance would go away.

Now if you do plan on putting down more at least 10% then the PMI will only be active for 11 years.  That is assuming that you are doing a 30 year mortgage.   PMI is basically insurance that the Federal Housing Administration  (FHA) charges you the consumer if you want this home loan, hence the term FHA loan.  It really give you no benefit other than being able to get the home loan.   It is really for the banks, in case you do not pay on your mortgage and they have to foreclose on you.   FHA will step in and cover any losses the bank suffer due to the foreclosure.   PMI is calculated based off of your loan amount.  There is a 1.75 % upfront cost that can be financed and then there is the annual fee of 1.35% that is divided by 12.   So for example on a $200k loan the upfront cost would be $3,500.00, and the monthly premium added to your mortgage payment would be $225.00

You can try to avoid paying PMI by trying to qualify for a conventional loan some loans allow you to avoid the monthly PMI with as little as 5%.  As long as you qualify for a conventional loan based off of credit etc.

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What You Need To Know If Buying A Condo?

All right here are some tips for you provided that you happen to be trying to buy a condo in the Santa Maria real estate market or where ever you plan on shopping for one, and what you need to be familiar with before hand.  Initial thing to keep in mind just like not all people are created equal and neither are all homes or condos and more importantly not all Condo associations!
The real estate market has quite a bit of condo complexes and with a number of  of them for sale,just like the homes in Santa Maria some are better than others for a number of reasons.  some of them are run very well and others not so well in addition to are underfunded.  The problem is when a condo association is having problems in addition to you purchase condo within that association their problems now become your problem.
Okay here are some tips for you assuming that you happen to be trying to buy a condo and what you ought to be familiar with before hand.  Initial thing to keep in mind just like not all people are created equal and neither are all homes or condos and more importantly not all Condo associations!
The real estate market has quite a bit of condo complexes and with many of them for sale.  A few of them are run very well and others not so well in addition to are underfunded.  The problem is when a condo association is having problems and you buy condo within that association their problems now become your problem.  When you acquire a condo you basically join a club in addition to take on a portion of the issues which they can be having.  So there are few steps that a person needs to keep in mind when considering a condo, because your decision is something that you will have to live with daily as you continue to own that condo.

1)      What is the Home Owners Association fee in addition to what does it pay for?

Generally this is just acknowledged as the HOA dues you could surely discover that some of those HOA dues as high as almost $400.00 per month.  Which is an extra $400.00 added toward your monthly payment on top of the loan on top of the taxes in addition to on top of the insurance, nevertheless I think you get the idea.  The HOA dues alone could make you or break you as to whether or not you will qualify for that condo or whether or not you even want to consider purchasing it.  The fee comes from the annual expenses to maintain the common areas such as the club house, the pool etc.  It is also a result of whether or not the association is professionally managed or self managed.  Provided that this is going to be your new monthly fee you need to recognize what your getting for what you pay for.

2)       Why Do HOA have rules?

This can unquestionably make acquiring your condo one extremely regrettable decision, considering the rules might prohibit pets, or even your ability to rent out the unit.  You will want to get a copy of the bylaws to see if there will be anything that you can have issues with.

3)      What is the percentage of renters vs. owners?

Usually renters do not at all possess the similar level of consideration for the property they abide in.  Whether or not it be a condo or a home too many renters tend to give unwanted issues.  Another consideration is that provided that there is too many renters in the condo complex the condo may not qualify for FHA financial backing.  Even with the condition that you were to acquire a conventional loan instead of an FHA loan and this was to be your primary home it may have to be financed as investment property due to the high number of renters.  A loan for investment property is normally an extra 1-2 points than the going rate for house which would be considered your primary home.   This could be a problem for certain communities when many homes for sale in addition to condos were bought by investors in the middle of the market frenzy many were used as investment properties.   Use the link below to find out if the Condo you anticipate on procuring will qualify for FHA funding due to having too many renters.

Here is the link to find out if your condo complex may or may not be approved simply go to:

4)     How much cash exist within the reserve fund account?

This is probably the most overlooked in addition to never actually taken into account until it is too late.  Procuring a condo you become part owner of the association in addition to a good number of  the bills which come with it. So with the condition that the association is poorly run or funded the condition of the condo complex as a whole can deteriorate.  Or a lack of funds can be an indication of possible litigation draining the fund which will eventually require a special assessment in regards to all those that intend to keep there condo units.  Reality just like individuals having to cope with bills and bad credit, a condo complex can end up having the issues when the bills and funds to pay them are not available.  You want to know is there an increase of delinquent owners if so the reserve fund will come to be drained.  Request a copy of their budge to look into if there can be any indications for concern.  The last you want is to do is to get a condo plan on a budget and get hit with new and higher HOA dues.   Don’t let this scare you seeing that obtaining a condo does have its benefits such as no yard and maintenance for some of us its simply not at all on the schedule in addition to it does every so often furnish you the luxury of having a pool and lets not forget the hot tub.  A few Condos even possess security which is a nice added benefit for anyone with kids especially supposing that you happen to be a single mom.  Basically look past the price in addition to make sure you will be happy with the condo association in addition to its rules and fees.  Getting a condo is not at all similar to buying a TV ,,,you can’t take it back supposing that you’re not happy with it.

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Finding Condos That Qualify For FHA Loans

There is going to be an estimated 2,200 condominium projects nationwide they will more than likely lose their eligibility for Federal Housing Administration-guaranteed sales and refinancing,when getting a new mortgage home loan, and some of these condo projects are right here in the Santa Maria real estate market.  The process on how to buy a home is just a bit different than buying a condo being that the complex the condo is located in also has to qualify.  The last time I looked at HUD’s site of approved condo projects all of the condo’s that were approved in the Santa Maria real estate market area were set to expired at the end of the year and that pretty much goes for a ton of condo projects nationwide due to many new changes that HUD is implementing to get a better and more secured collateral when guaranteeing a loan. So Unless condo officials take action, another 23,000 estimated residential condos with housing units numbering in the tens of thousands will lose their eligibility by spring of next year. That means that buyers of units in these buildings won’t be eligible for FHA financing, so instead of having to only put down 3.5% to get a loan to purchase condo they will have to put down much more. This was the result of an effort by the FHA to guarantee that condos and their underlying home owners associations have adequate budgets, legal documents, and other things that lead to financial stability. In 2009, the FHA spelled out tough standards that required that condo projects approved for FHA financial before 2007 have their approvals renewed by Dec. 7, 2010.  Because there were so many, the FHA extended the deadline, setting new deadlines throughout 2011. The only losers were the 2,200 projects that had the oldest approvals. The FHA urges all condominium owners to get in touch with their associations and push them to meet the revised deadlines, the reason being that if you want your condo to be marketable and retain value it needs to be a condo complex where someone can get FHA financing to buy any one of the condos in the complex, the reality is if you have to put down 10 or 20% down to purchase a condo then the prices, and values of that condo complex will have to come down to where it is more possible for the average condo buyer to put down the needed amount of funds to qualify to purchase it. For more information, or to check out the status of a condo project that you may be interested in or maybe your condo project, visit (select by state): https://entp.hud.gov/idapp/html/condlook.cfm




Here is also a  partial list of requirements for FHA certification.
At least 50 percent of units must be owner-occupied

No more than 15 percent of units can be delinquent (more than 30 days past due) in assessments.

No more than 10 percent of units can be owned by one investor. This includes a developer that may rent out vacant or unsold units.

No more than 25 percent of floor area can be commercial space.

The right of first refusal may be in the bylaws but cannot violate the Fair Housing Act.

A full budget review will take place. One important requirement is that it must show at least 10 percent of budget income applied toward reserves. Many association budgets do not meet this criteria.

After an association is FHA-certified, there are still limits on the number of units that can be mortgaged by an FHA-insured loan. Currently the cap is 50 percent of units. For complexes certified or recertified after Jan. 1, it will be 30 percent of units.

 


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Which Condos Will Qualify For FHA Financing?

Here is a Quick Tip, if you are ready to try to qualify for one of the many mortgage home loans available for first time home buyers but you are looking more into buying a condo vs. a home in the Santa Maria real estate market, because condo are usually cheaper.  The thing is sometimes buying a condo can be tricky for some first time home buyers, because getting financing is not always easy.  Some first time home buyers when they start to look  to buy something they start taking a more serious look at condos since they are usually a lot cheaper than a home, so the down payment is a lot easier to come up with.  Just don’t forget that with condos you will get to pay a homeowners Association fee that can be as little as $100.00 to as much $300.00 here in the Santa Maria area which is added on top of your mortgage payment.  For some this can be a real sticking point and when you factor in the over all payment it can be as much as owning a home although due to the price difference a down payment is usually a lot easier to come up with.   The HOA payment can also be something that will either qualify you for financing or not since it will be added to your over all debt ratio.

Does Your Condo Qualify for FHA financing?

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Because if it does not that means you may have to put down more money.  Usually at least 10% down payment  vs. 3.5 % down payment, for a FHA loan.  So rather than waste your time since you may not have that kind of money to put down just go to this website and find out if that condo complex is on the FHA website.    To give you an example on a 100k condo its a lot easier to put down $3,500.00 than it is $10k, and DO REMEMBER THAT THIS IS ONLY THE DOWN PAYMENT NOT THE CLOSING COSTS.   Using this example would mean $10,000.00 plus closing costs.

Here is the link to find out if your condo complex may or may not be approved just go to:  https://entp.hud.gov/idapp/html/condlook.cfm

 

Once you are at the website – The Condominiums page allows users to search for FHA-approved condominium projects by location, name, or status.  The search can be configured to find specific types of projects through the use of the pull-down menus and entry fields.  I would suggest in the STATUS menu (last one) that you click on the pull-down menu and choose ALL.  Projects can have their FHA approval withdrawn for various reasons and you will need to know that information.

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