Category Archives: Financing
Condo Financing Guide
Your Guide to Financing A Condo
In many ways, financing a condo is the same as financing any other residential property. The same lenders that make loans on other residential properties typically finance condos as well. Things like down payment requirements and other qualification standards are largely the same. However, there are a few key differences you should know before you start shopping.
Lenders generally require the same personal qualifications for a mortgage on a condo as they do for a single-family home loan.In other words, if your loan product requires a 10% down payment, that generally applies to a condo, as well. If your lender requires a debt-to-income (DTI) ratio of 36% or less for a single-family mortgage, the same will typically apply to a condo. In a nutshell, there’s nothing special required from you to finance a condo.
Although there are no special requirements for you to qualify for a mortgage on a condo, there may be special requirements related to the condo itself. Here’s a rundown of things a lender could look at when you apply for a mortgage on a condo:
- The condo association will likely receive some scrutiny. For starters, the lender will want to see that the association is in good financial condition, has adequate insurance, few owners are delinquent on their association dues, and that there are no pending legal issues against the HOA.
- To qualify for financing, a condominium generally will need to be entirely residential in nature. For example, if a portion of the building is occupied by hotel rooms or commercial space, it could be a dealbreaker for a lender.
- If any of the condos in the building were sold as timeshare units, you could have an issue obtaining financing.
- Lenders typically want to see that a certain percentage of the units are owner-occupied and aren’t owned as rental properties. For the purposes of occupancy requirements, condos owned as vacation homes are generally considered to be owner-occupied.
- Lenders use comparable sales to determine how much a property is worth. With condos, they may want to see comps from the same building. If no units have recently sold, this could be a roadblock for financing.
You have several choices for condo financing. Here are some choices based on your situation:
- Conventional Full Review – The condominium needs a Fannie Mae approval; buyers can move in with as little as 3% down.
- Conventional Limited Review – A very limited review of the condominium association. No reserve requirements or long questionnaires to complete.
- FHA Spot Condominium Approval – The condominium must meet FHA spot condominium review approval parameters; buyers can move in with just 3.5% down.
- VA Approved Condominiums – The approved condominium can be financed with no money down for military veterans and active military with acceptable VA benefits.
If you’re applying for FHA financing for a condo, there are some specific requirements you should know about.
- The condo has to be your primary residence.
- The biggest potential roadblock is that the condo must be listed on the FHA-approved condominium list. This is a list of condos in the U.S. that meet HUD standards. If the condo isn’t on the list, it doesn’t qualify for FHA financing — period.
- More than half of the units in the condominium have to be owner-occupied, and at least 80% of all units with FHA financing must be owner-occupied. To get an FHA mortgage, a home must be your primary residence, but you can convert it into a rental after a certain number of years.
- The condo complex must have been complete for at least a year. In other words, you can’t get an FHA loan on a condo in a building that’s under construction or that has been recently completed. This rule applies even if the building your unit is several years old but a new phase is being added.
If you’re applying for a conventional (non-FHA) mortgage on a condo, the requirements vary based on your lender, the size of your down payment, and more. The condo concerns I discussed a couple of sections ago generally apply to conventional financing, but some of the FHA rules don’t. For example, you can use a conventional mortgage to buy a condo that’s still under construction or was recently completed. And if you want to buy a condo as a vacation home or investment property, a conventional loan is the way to go.
The main difference between financing for condos and single-family homes is that there are two things that need to qualify for financing — you and the condo building itself. The qualification standards for you are generally the same, no matter what type of home you’re buying. You’ll still need an adequate down payment, enough income to justify the loan, and stable employment, for example. However, you can expect the condo and its association to be put through a rigorous approval process. That process could prevent you from getting financing, even if you’re an otherwise well-qualified applicant.
Source: https://www.fool.com/millionacres/real-estate-financing/articles/your-guide-financing-condos/
The Things That Matter The Most In Your Credit Report
If you haven’t looked at your credit report in a while, it’s probably time to go ahead and pull another free one at www.annualcreditreport.com. This is a site supported by the three main credit repositories, Equifax, Experian and TransUnion and allows consumers to get a free report once per year. Consumers are encouraged to retrieve this report primarily to make sure there are no errors showing up. Unfortunately, credit reports have their fair share of mistakes.
But it’s really not the fault of these repositories because they only report what is sent to them by merchants and businesses who issue credit. When data is forwarded to them, they include it. They’re not going to verify data on their own each time someone’s payment history is sent to them. They’ll review it when a consumer sees a mistake and informs them of the offending line item.
For example, someone with a similar name might show up on your report and show some late payments which don’t belong to you. That’s the sort of thing to look out for. You’d be surprised about what all is included in your report. The property addresses where you’ve lived over the years will appear. So will any other names you’ve gone by. John Smith, J. Smith, John D. Smith, John David Smith…you get the idea.
When consumers do view their report, they should look for mistakes, but they also want some assurances what’s being put out there is accurate. For those building a strong credit history, it’s important to make sure these credit agencies are reporting your timely payments. Some of the data bits being reported are more important than others. What are they?
Surely the addresses of where you’ve lived over the past few years isn’t that important. At least to you, anyway, right? And of course, any other surnames you’ve used. If you married John Doe and you’re Jane Smith, you’ll be recorded as both Jane Smith and Jane Doe. Pretty simple.
Paying on time is the most important factor in your credit report. So too are account balances. Someone who regularly keeps a balance at or near the allowable limit will see their scores fall. On the other hand, keeping a relatively low balance at all times improves scores.
A late payment on a credit card you’ve had for a while won’t hit your scores very hard as long as the late payment (more than 30 days past the due date) is relatively isolated. But a late payment on a mortgage will count more against you compared to a late credit card payment. A bankruptcy or a foreclosure is the most damaging to a credit report, although the damage is lessened over time. What’s more important on a credit report is what has happened over the past couple of years, not something that happened say five or six years ago. Old, bad information will be shown, just largely ignored as long as current and timely payment patterns are being reported.
When applying for new credit, an “inquiry” will be entered into your record. An occasional inquiry for new credit won’t affect your credit but if there are multiple inquiries for new credit within a specific period, that will harm your credit. Not as much as a late payment or high balance accounts, but an impact, nonetheless. Multiple inquiries will carry more weight when there are other negative marks appearing.
In general, it all goes back to making sure payments aren’t made more than 30 days past the due date and keeping balances somewhere around one-third of credit lines. These two are the biggies. When a mortgage company reviews a credit report and credit scores, if payment history and balances are kept in check, your credit will be just fine.
Source: RealtyTimes
Author: David Reed
