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Earlier this year, both Fannie Mae and Freddie Mac tightened up their lending guidelines for condos. This change has caused quite a stir in the mortgage world, and times are now as tight as I have ever seen them. The new guidelines are specifically directed at condominiums located in resort communities such as here in the High Country and in locations such as the costal areas along Florida and other vacation spots.
The new guidelines have made it much more difficult to be approved for a mortgage on many of the condos in our area, and this is no matter how much income you have, how much you plan to make as a down payment and no matter how high your credit scores are running.
As an example of the new rules, the loan to values on the condo programs has been reduced, so higher down payments are now required on condos that Fannie and Freddie will approve.
The insurance requirement for insurance on the association has increased too. And the number of condo owners that are delinquent on their dues has decreased too.
The rules are now very specific as to rental income for those of you who own condos but try to offset some of the costs by renting the condo. In the good old days, if you received a thousand dollars or two from rental income, the underwriters had the flexibility of overlooking that income as it was a minimal income versus the cost of the condo. The new rules detail how any income, no matter how small, is no longer acceptable for a second home. If rental income shows up on your federal taxes, the condo is considered an investment property and the interest rates are substantially higher than the rates for second homes.
Plus, if in the real-estate appraisal it is noted that there is a staffed front desk, central telephone system, daily cleaning service, a central key system and owners advertise their privately owned unit for rent on a nightly basis, the application for a mortgage will most likely be denied.
Now all of this will slow the recovery of the real-estate market in most areas and slow the sales as fewer buyers and fewer condos will qualify for conventional mortgages. But this has happened before here in the High Country, and a light at the end of the tunnel has already appeared. I know a couple of mortgage lenders that are underwriting their loans and selling their loans to private investors at great rates.
So if you are looking to buy it is still a good time to take advantage of the slower market. I do suggest strongly that you get with your mortgage professional at the beginning of the process to know which condo is easy to finance and to learn which ones are impossible. Be prepared, and the whole process will run much smoother for all involved.
For answers to your mortgage related questions call Bob Kieber at (970) 262-1199 or e-mail him at rkieber@comcast.net. Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.
The new guidelines have made it much more difficult to be approved for a mortgage on many of the condos in our area, and this is no matter how much income you have, how much you plan to make as a down payment and no matter how high your credit scores are running.
As an example of the new rules, the loan to values on the condo programs has been reduced, so higher down payments are now required on condos that Fannie and Freddie will approve.
The insurance requirement for insurance on the association has increased too. And the number of condo owners that are delinquent on their dues has decreased too.
The rules are now very specific as to rental income for those of you who own condos but try to offset some of the costs by renting the condo. In the good old days, if you received a thousand dollars or two from rental income, the underwriters had the flexibility of overlooking that income as it was a minimal income versus the cost of the condo. The new rules detail how any income, no matter how small, is no longer acceptable for a second home. If rental income shows up on your federal taxes, the condo is considered an investment property and the interest rates are substantially higher than the rates for second homes.
Plus, if in the real-estate appraisal it is noted that there is a staffed front desk, central telephone system, daily cleaning service, a central key system and owners advertise their privately owned unit for rent on a nightly basis, the application for a mortgage will most likely be denied.
Now all of this will slow the recovery of the real-estate market in most areas and slow the sales as fewer buyers and fewer condos will qualify for conventional mortgages. But this has happened before here in the High Country, and a light at the end of the tunnel has already appeared. I know a couple of mortgage lenders that are underwriting their loans and selling their loans to private investors at great rates.
So if you are looking to buy it is still a good time to take advantage of the slower market. I do suggest strongly that you get with your mortgage professional at the beginning of the process to know which condo is easy to finance and to learn which ones are impossible. Be prepared, and the whole process will run much smoother for all involved.
For answers to your mortgage related questions call Bob Kieber at (970) 262-1199 or e-mail him at rkieber@comcast.net. Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.
