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Before You Choose a Mortgage Lender, Read These Tips

October 10, 2019

Everyone in the market for a house has different wants — pre-war charm, a lush backyard, a welcoming front door in Pantone Ultra Violet, perhaps — but at the end of the day, they all share a need in common: money. Lots of it.

That’s where your mortgage lender comes in. The right lender can save you time, anxiety, and loads of cash. And the right loan officer — the professional who represents the lender — can be a powerful ally when you close on a mortgage. As with any potentially life-altering partnership, it’s important to choose wisely. 

Only You Know Which Lender Is Your Type

There are three types of mortgage lenders — retail banks, credit unions, and mortgage banks — as well as mortgage brokers, who compare loan products via a coterie of potential lenders to help you, the client, find the right one. Before you start narrowing down the candidates, you have to know what you’re looking for, and where to find it. Let’s talk about your options. 

Retail Banks

What they are: These are your Chases and Banks of America, plus your local banks. They do their own underwriting (in a nutshell, investigating your finances), so retail banks, especially the smaller ones, can sometimes offer lower fees and less-stringent credit requirements. If you like to have your accounts all in one place, you may want to use your own bank or credit union. 

Who you’ll work with: You’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan. 

Credit Unions

What they are: They’re not-for-profit and customer-owned, so they’re not beholden to shareholders like a bank. Because of that and their not-for-profit tax status, they typically offer more personal service and lower fees. The flip side is less convenience: They have fewer branches and ATMs. 

And to apply for a loan, you must be a member of the credit union’s community, which could be faith-, employment-, interest-, or union-based, among other things. That said, it’s typically not difficult to become a member; the National Credit Union Administration’s Credit Union Locator is a tool for finding credit unions near you. 

Who you’ll work with: As with a bank, you’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan. 

Mortgage Banks

What they are: These banks only offer home loans. Many online lenders operate as mortgage banks. 

Who you’ll work with: A mortgage bank will assign you a loan officer, who will receive a commission or bonus from the lender’s gross fees for writing your loan. An online lender is going to offer less hand-holding. 

Mortgage Brokers 

What they are: Mortgage brokers are essentially personal home loan shoppers — they act as liaisons between home buyers and mortgage lenders to help people find the lowest rates and the best mortgage terms. They’re able to get home buyers the best mortgage rates because they leverage their existing relationships with lenders — something individual home buyers can’t do. By doing the heavy lifting for the borrower, the idea is that they make loan shopping more convenient — and perhaps a bit faster. 

Who you’ll work with: A mortgage broker can be an individual agent or a group of agents, who act as independent contractors. In exchange for their services, mortgage brokers typically charge a 1% to 2% fee of the loan amount, which is either paid by the borrower or the lender at closing. 

Now that you’re armed with the basics, you’ll want to give yourself time to weigh the options about which lender, exactly, to work with. 

It Pays to Shop Around Before You Commit

Over the life of the loan, seemingly subtle differences could add up to tens of thousands of dollars. That money belongs to future you and all your dream vacations, renovations, and remodeling #goals. 

So before you choose your specific lender …

Thoroughly research any retail bank, credit union, mortgage bank, mortgage broker, or online option you’re considering. Make sure you’re clear on what they can offer you. About one in five (21%) home buyers said they regret their choice of mortgage lender, according to a recent J.D. Power survey. You’re doing your homework so that won’t be you. 

Interview lenders. You’re aiming for a shortlist of three. (You’ll see why it’s three in a minute.) If you’re thinking about selecting an online lender, make sure you take into account these tips and tricks. 

Don’t be shy about seeking advice. Survey your family, friends, and coworkers — especially the ones who are nerdy about money. 

Ask your real estate agent for a second opinion. They have experience with reputable lenders, particularly in your city or town. 

Now, let’s say you’ve narrowed your list of potential lenders to at least three candidates. The next step? Finding out whether they will give you a loan. You Should Seek Out a Lender’s (Pre-)Approval, Too

There’s a world of difference between being pre-qualified for a loan and being pre-approved. Pre-approval means you’ve got skin in the game. It means you’re a boss. And it’s proof that you can buy. 

Besides being the grown-up thing to do, pre-approval puts you in a better position when you make an offer. Everyone takes you more seriously. Pre-approval provides evidence to your real estate agent and the seller (or seller’s agent) that a trusted financial institution is willing to finance the purchase. 

In most housing markets, sellers are going to expect your to be pre-approved when you make your offer. And when you’re pre-approved, you’re more likely to have your offer accepted — or at least, you won’t lose out on a bid because you have to go back to the bank to get approved for a loan. 

As for pre-qualification, it’s an approximation and not necessary unless you have no clue about your creditworthiness and just want a snapshot. 

By contrast, with a pre-approval, a lender typically goes deeper and tells you more specifically how big a loan you can get. Caution here: Just because the lender says you can take out a loan for an amount, doesn’t mean you should. Consider your lifestyle and monthly budget to decide on the responsible loan amount for you. 

To get pre-approved, you must also authorize a lender to pull your credit. 

Borrowers with credit scores of 760 or higher can typically qualify for the lowest interest rates. 

Borrowers with credit scores below 650 may need to apply for a non-conventional mortgage, such as a Federal Housing Administration (FHA) loan — a government-backed loan that requires a minimum credit score of 580 but lets borrowers make as low as a 3.5% down payment. 

Borrowers with credit scores below 580 can still qualify for FHA loans, but they’ll have to make at least a 10% down payment. The lower the score, the tighter the requirements become. 

When you’re pre-approved, you’ll receive a Loan Estimate. This three-page document is about to be your new best friend. 

It Makes Good Sense to Get Pre-Approved by at Least Three Lenders

A Loan Estimate spells out a future loan’s terms, including:

  • The interest rate
  • The length of the loan
  • Estimated costs of taxes and insurance
  • How interest rates and payments might change over time

Other important financials

By comparing loan estimates, you can effectively size up your loan options and decide which lender is best for you — and your future. (If you need help navigating the details, the Consumer Financial Protection Bureau offers a sample Loan Estimate with helpful tips and definitions.) 

Getting pre-approval early in the process also gives you an edge over other buyers. Here’s why: 

  • The amount you’re approved for can help you determine your price range, and thus save time and frustration when shopping.
  • It sends a signal to your agent and sellers that you’re serious about buying a home.
  • It’ll help you move quickly to make an offer when you see a home you like.

And it’s an excuse to celebrate! You now have everything you need to move ahead with that one special lender — and, at the same time, connect with an officer or broker who can help you select the home loan product that’s best for you. 

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

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What Does Homeowners Insurance Cover?

October 3, 2019

You’d be surprised at what your home insurance policy doesn’t cover. Here’s what is and isn’t covered by your insurance.

What does your homeowners insurance cover? The short answer is: “A basic homeowners insurance policy (called HO-1 in insurance lingo) covers your home and possessions if they’re damaged or destroyed by these things:

    Fire
    Lightning
    Windstorm (unless you live in a hurricane zone)
    Hail (not available everywhere)
    Explosion
    Riots
    Civil commotion
    Aircraft  (and things falling from aircraft)
    Vehicles (and things thrown from vehicles)
    Smoke
    Vandalism (although some policies exclude this)
    Malicious mischief
    Theft
    Volcanic eruption

But many states don’t allow this basic policy to be sold. Instead, you have to buy an upgraded policy that Upgraded Homeowners Insurance

That upgraded policy (called HO-2) adds protection to your home and possessions from even more perils. You get protection from everything on the HO-1 list (above) plus: covers more perils.

    Falling objects
    The weight of ice, snow, or sleet
    Flooding from your appliances, plumbing, HVAC, or fire-protection sprinkler system
    Damage to electrical parts caused by artificially generated electrical currents (such as a power surge not caused by lightning). But damaged electronics such as computers aren’t covered.
    Glass breakage
    Abrupt collapse (say from termite damage)

That same list applies to the homeowners insurance you buy for a condominium or co-op (except then it’s called HO-6 instead of HO-2).

With HO-1, HO-2, and HO-6, what you see is what you get. So if zombies attacked your home, your HO-1 or HO-2 wouldn’t cover the damage because zombies aren’t on the list of specific things those policies cover.

The Most Complete Homeowners Insurance

The most complete and protective form of homeowners insurance (called HO-3) covers you for all perils except some specific ones like:

    Floods
    Earthquakes
    Wars
    Nuclear accidents
    Landslides
    Mudslides
    Sinkholes

With this policy, if zombies attacked, you’d be covered because zombies weren’t specifically excluded by your HO-3 policy.

What Homeowners Insurance Doesn’t Cover

No matter which basic policy you get, it’s not going to cover everything than can damage or destroy your home. Typical homeowners policies don’t cover:

    Bad things that happen because you failed to maintain your home (like mold)
    Hurricanes
    Floods
    Earthquakes
    Mudslides
    Landslides
    Sinkholes
    War
    Nuclear accidents
    Sewer backups
    Sump pump failure
    Ground movement and holes caused by mining (known as mine subsidence insurance)
    Pollution

You can buy additional policies to cover some but not all of those perils (a quick Google search didn’t turn up any nuclear accident coverage).

And even if insurance is available for the most common natural disaster in your area, you may not be able to buy it if your home has features that make it vulnerable. For example, a home with unrated wood shake roof shingles may be tough to insure in an area where wildfires are common.

Other Things Homeowners Insurance Covers

In addition to covering your home, homeowners insurance also covers four more things:

1. Your outbuildings, landscaping, and hardscaping. If you have outbuildings (like a barn), landscaping, or hardscaping (like fences), your homeowners policy most likely covers those for up to 10% of your policy amount (5% for plants).

For example, if you have $100,000 in homeowners insurance and someone drives into your fence, the policy would cover 10%, or $10,000 in repairs.

Sometimes policies exclude damage to outbuildings, landscaping, or hardscaping caused by a particular peril (like wind).

2. Damage or loss of your personal belongings. Your homeowners policy covers your family’s belongings, even when you take them out of the house. If your child heads to college with a laptop and it’s stolen, that’s probably covered by your homeowners insurance policy.

A home insurance policy covers a lot of your personal belongings, but not necessarily everything.

You’ll need additional insurance if you have many expensive items like jewelry, furs, or antiques.

Policies will either state that your personal belongings are insured for replacement cost or cash value.

Replacement cost means that the insurance company will pay the full cost of replacing an item (such as the laptop mentioned above, or a sofa damaged in a fire) once you show a receipt. Cash value means the insurance company will issue you a check for the amount that the laptop or sofa would have been worth when it was stolen or destroyed.

3. Temporary living expenses if your home is so damaged you can’t live in it. When you can’t live in your home, your homeowners insurance covers your living expenses, including hotel bills and meals. But, you can’t live in the hotel forever and eat lobster every night on the insurance company’s tab. Your policy will have limits on how long you stay and how much you can spend.

4. Injuries or accidents at your house. Homeowners insurance coverage includes liability – meaning it covers you when you or your family members cause injuries or damage. This coverage also pays when your dog bites someone (medical payments) or someone falls and injures themselves.

Add an umbrella policy to boost your liability coverage into the millions.

Homeowners Insurance for Older Homes

There’s another kind of homeowners insurance (HO-8) used when your home is so old it would be impossible to replace. It couldn’t be built like the original — that is, new electrical code wouldn’t permit the same electrical, etc.

An HO-8 policy covers the same perils as the basic HO-1, but will only pay you the repair cost or market value instead of the replacement value.

If your home is old, but not so old that it’s historic, you might want another homeowners insurance coverage. A “law and ordinance” policy covers the cost of rebuilding using today’s building codes. It’s good to have if the building codes have changed a lot (for example, in Florida) since your home was built.

From: ClientDirect

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

A Fall Checklist of 10 Things You Gotta Do Before Winter Sets In

September 26, 2019

When the last of summer’s heat is a faint memory, and you’re pulling out your hoodies more than your shorts, it’s time to tackle a few simple chores that’ll make winter more pleasant and prevent some nasty surprises next spring.

This fall checklist helps:

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

San Diego’s granny flat ‘handbook’ aims to eliminate confusion, encourage construction

September 16, 2019
A granny flat in Clairemont.
(U-T File Photo)

The 42-page guide is part of city’s effort to solve housing affordability crisis

By DAVID GARRICK AUG. 15, 2019 

San Diego has created a 42-page granny flat handbook to encourage more property owners to construct such housing units by making the process easier to understand.

Granny flats, which are additional housing units on an existing property, are being viewed in San Diego and across the nation as a way to create more housing without more land or infrastructure.

City officials say granny flats are the fastest and cheapest way to grow the local supply of affordable housing, prompting them to create the handbook so fewer people will be intimidated or confused by the process.

The handbook explains zoning rules, parking requirements, the city’s approval process and the details of a subsidy program the city established last year.

It also covers how to secure a city permit, how far from property lines a granny flat must be built, how the units might affect property taxes, whether a unit can be sold and when the property owner must live on-site.

“These are the things people don’t think about when they decide to put one of these in,” said City Councilman Scott Sherman, who has spearheaded city legislation on granny flats.

The city collaborated on the handbook with the San Diego Housing Federation, the Local Initiatives Support Corporation, and the Pacific Southwest Association of Realtors. The city’s formal name for a granny flat is an accessory dwelling unit, or a companion unit.

“Companion units are an important tool that will create naturally occurring affordable housing units that are desperately needed in San Diego,” said Stephen Russell, Housing Federation executive director.

Ricardo Flores, executive director of LISC, said the handbook could be particularly helpful in low-income areas.

“The region’s housing crisis is a serious issue that hurts San Diego’s disadvantaged the most,” he said. “Companion Units will give residents in disinvested neighborhoods more options to improve housing affordability and better options to offset the cost of a mortgage.”

Sherman said the handbook will be followed by a companion guide this fall featuring a series of pre-approved design templates to reduce architecture costs and streamline the approval process.

“You pick up one of the pre-approved templates and you just build it and get it inspected and call it a day,” he said.

Encinitas recently began providing a similar set of templates to encourage construction of granny flats there.

Granny flats are considered ideal for recent college graduates, young people with lower-paying jobs and the senior citizens on fixed incomes who gave these units their colorful name.

In addition to boosting the local housing supply, granny flats generate income for homeowners that decrease the likelihood they will struggle to pay their mortgage.

A recent analysis of the city’s 236,000 single-family detached homes estimated that 2,700 to 5,500 granny flats could be built during the next decade.

The city’s efforts build on state legislation three years ago that eased parking regulations and rules requiring large buffer areas between structures and property lines.

San Diego has since eliminated sewer and water fees, shrunk development fees and loosened zoning regulations for granny flats.

Because some fees, such as those covering school construction, couldn’t be waived under state law, San Diego also established a subsidy program during the fiscal year that ended June 30.

The $300,000 set aside for the program was exhausted quickly and played a role in the construction of 84 granny flats across the city, so the City Council more than doubled funding to $800,000 for the fiscal year that began July 1.

Meanwhile, the city’s Housing Commission is launching a separate pilot program to build 40 granny flats adjacent to single-family homes on properties that the commission owns.

The new units, which could be constructed before the end of the year, will be geared for low-income tenants and include a variety of sizes and designs. The goal is analyzing costs, timelines, the construction process and potential hurdles.

The commission plans to use that information to launch a loan program next spring to help low-income households build granny flats on their properties.

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

The Dirty Secret About Most ‘Fixer Uppers’

September 12, 2019

Before you try to become your own dime-store Chip or Joanna Gaines, go back and check the math again on that “fixer upper.”

Then maybe check it a third time.

That’s the message of a new survey, which found that despite the glamor and plethora of TV programs devoted to home renovation, most amateur fixer-uppers end up being a big waste of time and money. Once you factor in all the costs involved, the renovation project often turned out no cheaper than just buying a home in move-in condition.

“Even though the majority of fixer-upper homeowners thought they could save money, they actually spent about the same or more than their move-in ready counterparts,” reported Porch.com, a home improvement website, which sponsored the survey.

Their survey of 1,069 U.S. homeowners found that those who had bought a home that was move-in ready spent an average of $250,000.

Those who bought a “fixer upper” spent an average of about $50,000 less. But then they typically spent that amount, or more, on the renovations, the survey found.

OK, so it may not be apples to apples. Buying your own home and renovating it gives you a greater chance to tailor it to your own dreams and needs. But the costs were comparable nonetheless. And those who just bought a home that was ready saved themselves a lot of extra pain.

The biggest problem with fixer uppers? The danger of running over budget.

More than two-fifths of those who bought fixer uppers ended up blowing way past their budget. On average they ended up spending about $76,000 on renovations, or 60% more than those who were able to stick to the allotted amount.

Among those who bust the budget, there was no common culprit either. For some it was the costs of repairing the roof. For others it was the costs of fixing the basement. New kitchens were about as likely to cause pain as new bathrooms. Ditto new flooring and new driveways, replacing the plumbing and replacing the electricals. Installing new heating, ventilation and air conditioning proved the most likely project to turn your wallet inside out, but not by a wide margin. You never know what’s going to turn your dream home into a “money pit” until it does.

About two-fifths of those who bust their budget said they wouldn’t buy their current home again.

Professional house restorers Chip and Joanna Gaines have become a cultural phenomenon thanks to their program, “Fixer Upper,” filmed in their hometown of Waco, Texas. The couple, who have five children, renovate old houses on behalf of home buyers moving to the city.

Regular fans of the program notice the pair always manage to bring the project home for the amount allotted, even when the projects are hit by sudden, unexpected problems. But the most recent survey suggest that’s what it’s like when you’re a professional — and on TV.

For more information, go to Porch.com

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

As Recession Fears Rise, Here’s the Lowdown for Real Estate

September 5, 2019

It seems that whenever you pick up a newspaper or turn on the news these days, a scary word hits you in the face: “recession.” Germany is already teetering on the brink of recession; an unruly exit from the European Union this fall could cause one in Britain; and in the U.S., a rapidly escalating trade war with China is increasing fears.

But although the R-word may be a trigger for those who remember—or even experienced—the mass layoffs, scores of foreclosures, and plummeting home prices of the last downtown, folks shouldn’t panic just yet. And they shouldn’t expect another real estate fire sale.

“This is going to be a much shorter recession than the last one,” predicts George Ratiu, senior economist with realtor.com®. “I don’t think the next recession will be a repeat of 2008. … The housing market is in a better position.”

Federal Reserve Chairman Jerome Powell indicated on Friday that last month’s interest rate cut would be followed by another in September, but cautioned that that might not be enough to counter the trade tensions, which ratcheted up in recent days as China responded to an earlier round of U.S. tariffs with its own, and President Donald Trump responded by making U.S. restrictions even tougher.

About 2% of economists, strategists, academics, and policymakers believe a recession will start this year, according to a recent survey of more than 200 members of the National Association for Business Economics. Thirty-eight percent believe one will begin in 2020, while 25% anticipate one starting in 2021. Fourteen percent expect it won’t materialize until after 2021.

However, Trump seems confident that there’s no risk of a recession at all. He’s been putting out a series of positive tweets about the economy for the past week or so.

He responded to China’s tariff announcement on Friday by tweeting, “Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!”

For sure, unemployment is hovering around the lowest it’s been in the past 50 years. (However, it turns out there weren’t as many jobs in 2018 and early 2019 as previously reported.) Wages are growing, and we’ve entered the longest economic expansion in U.S. history. But a downturn within the next two years still looks likely—particularly if a trade war heats up, making it more expensive to import goods. Those increased costs are likely to be passed along to everyday consumers.

The housing market’s risky mortgages and rampant speculation were blamed for plunging the world into a financial crisis the last time around. But these days real estate isn’t likely to be the cause of a recession.

Will home prices and sales plummet in a recession?

Aspiring buyers hoping that home prices will crash, like they did during the Great Recession, are likely in for a rude awakening. There simply aren’t enough homes being built to satisfy the hordes of buyers. And with more members of the giant millennial generation wanting single-family homes in which to raise their growing families, there isn’t likely to be a drop-off in demand anytime soon.

But the anticipation of a recession in itself could make the housing shortage even worse. Worried would-be sellers may decide to postpone listing until they can get top dollar for their properties.

Yet although a lack of homes for sale typically drives up prices, that effect could be mitigated if there are fewer folks who can afford to buy. In a recession, it could become harder to find a good-paying job or steady freelance work. Even those who remain gainfully employed may worry about their job stability.

“If we do go into a recession, there will be layoffs,” says Ali Wolf, director of economic research at Meyers Research, a national real estate consultancy. “If you move from a two-income household to a one-income household, it doesn’t change the desire to own. But it does impact the ability.”

Realtor.com’s Ratiu believes prices will flatten, but likely not fall. Meanwhile, the number of home sales will also remain flat or potentially even dip, he believes.

Other economists expect the recession to take a bigger toll on housing.

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time,” Wolf says. “But prices aren’t likely to fall 50% like they did last time.

“We do expect prices will fall marginally,” she continues. The priciest parts of the country, which saw the biggest price hikes, could see the biggest price corrections. Sales could decline anywhere from 10% to 20%, she predicts.

The luxury market is already seeing price decreases. These high-end homes, usually in the range of $1 million and up, are usually considered a bellwether for the greater housing market.

A big wild card in all of this is mortgage interest rates, which were at an ultralow 3.55% for a 30-year, fixed-rate loan as of Thursday, according to Freddie Mac data. If they continue to fall, it could give the housing market a boost. That’s because low rates translate into lower monthly mortgage payments.

Could rentals become cheaper?

Those hoping for rental prices to be slashed will probably be disappointed as well.

“We expect a little bit of an impact,” says Greg Willett, chief economist at RealPage, a property management technology and analytics company for apartment buildings. “But it’s not doom and gloom.”

He expects apartment price hikes to slow from 3% annually to more minor 1.5% or 2% price increases over the next few years. The rental market is likely to be buffered by those nervous about making what could be the largest purchase of their lives, a home, in uncertain economic times. Those folks may decide to live in a rental until the economy is booming again.

By: Clare Trapasso via California Association of Realtors

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

NAR: New Condo Rules Will Open More Doors for Buyers

August 22, 2019
Photo Courtesy: NAR

The association says changes to FHA financing qualifications will bring more entry-level homes to the market, helping to meet buyer demand.

REALTOR® Magazine Staff

The National Association of REALTORS®, after reviewing the Department of Housing and Urban Development’s new condominium financing rules, says the guidance affords property owners greater flexibility in the qualification process for loans insured by the Federal Housing Administration. Lenders will be able to issue FHA loans for single condo units, and buildings with a greater number of investor-owned units or greater percentage of commercial space can qualify for FHA financing, among other changes HUD released Wednesday. NAR expects the new rules, which will go into effect Oct. 15, to revive a condo market that has been stifled since the Great Recession.

NAR says the new condo rules, which will help more would-be buyers access affordable housing, satisfy many of the changes the association has backed for more than a decade. Specifically, the new rules will:

  • Extend FHA certifications on condo developments from two years to three years, with an additional six-month grace period to meet requirements. This will alleviate some of the cost and time burdens on condominium associations that intend to maintain FHA approval. Condo associations also may continue submitting updated recertification packages, rather than the full certification package each time. The National Association of REALTORS® expects the change to prompt more condominium properties to apply for FHA eligibility, making more affordable housing more accessible.
  • Allow for single-unit mortgage approvals—often known as spot approvals—that will enable FHA insurance of individual condo units, even if the entire property does not have FHA approval. The condo building in which the FHA buyer wants to purchase must meet certain requirements: The property must have at least five units, a limited concentration of FHA-insured units, at least 50% owner-occupancy, and a maximum of 35% commercial space.
  • Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building. While the current owner-occupancy requirement is 50%, HUD may approve an owner-occupancy level as low as 35% for older properties with less than 10% of units in arrears. Individual investors can purchase no more than 10% of units in a property with more than 20 units and no more than one unit in properties with less than 20 units.

FHA approvals for condos prior to these changes have been heavily restricted. For example, the National Association of REALTORS® pointed to data earlier this year showing that in Florida’s Miami-Dade County, there were 5,683 condo projects—but only seven had FHA approval. NAR sent out an all-member email about the new condo rules Wednesday morning.

“It goes without saying that condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” NAR President John Smaby said in a statement. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The association’s most recent existing-home sales report, released in July, showed that sales of condos and co-ops dropped 6.5% year over year. Further, with more than 8.7 million condo units nationwide, only 17,792 FHA condo loans were originated in the past year. Down payments for single-family homes also have grown significantly more expensive in recent years in the absence of widely accessible FHA condo financing, NAR argues.

FHA restricted its condo approval process in 2009, which limited the number of properties that could receive FHA loans. In 2016, it moved to lift several of those restrictions, but the proposed rules were never finalized.

Consider me your #1 resource for all things Real Estate! Household changing? Getting married (or divorced)? Time for a change of scenery or job relocation? Want to invest? Just send me an email or call 619-888-2117. I can help.

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