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NFT: ISO advice on buying Condo

twostepgiants : 8/15/2018 12:53 pm
I am currently in contract on a Condo in Long Island

My mortgage broker just informed me that I will need

We are the buyer:
25% down and not 20%
The interest rate goes up .25 (so Im getting 5.125 with credit score of 810)
And I will need $9500-$12800 toward closing and not the expected $3000-6000

This is all because its a Condo i was told

When we bought our Coop in Queens a few years ago we paid about $3500 in closing costs. We had a different broker then

Does this match anyones experienced?

Thanks for any info/knowledge anyone can give
I’d go on lending tree  
superspynyg : 8/15/2018 12:56 pm : link
Or one of the other sites.

Shop around.
The ribbed kind are great  
jlukes : 8/15/2018 12:58 pm : link
.
The 25% is likely due  
allstarjim : 8/15/2018 1:05 pm : link
to Condo Association reserves account not meeting Fannie Mae guidelines. If you had a good lender or real estate agent, they would explain that to you. If that is the case, which I STRONGLY expect that it is, that is not going to change with any other lender unless you have a great agent like me who has dug into a condo association's finances and budget and found extra money that they didn't include in their reserve account that allowed them to meet the threshold to qualify for an 80-20 loan, which I have done.

As for rates...they fluctuate and the quote your receive one week might not be the same the next week if you didn't get your rate locked in. You can buy down the rate, and you can shop around...but if you are already under contract, re-setting the financing timer might not make sense. Talk to your agent about your contractual position. If you are flying solo...well, you might be an example of why you shouldn't do that. If you do rate-shop, you will likely find other lenders that will give you better rates, but with higher fees and closing costs. Don't get hoodwinked. Any lender should give you a full list of what it will cost to close and disclose all fees, upfront, and with the rate included. And strongly suggest you shop local mortgage brokers, not the national outfits who you are just a number to.
I have been in the business...  
EricJ : 8/15/2018 1:47 pm : link
so let me take a guess as to what happened here.

1. There often is a difference in the program between a condo and a single family detached residence. Sometimes it is a slightly higher rate and/or possibly a larger down payment.

2. There could also be a difference in the escrows vs what was originally projected creating a larger closing cost estimate.

That being said, I think 25% down for condo is high IF all other factors are also not a problem. Your credit score for example matters and can change the math on this.

Regarding lending tree. Here is what they do. They sign up various lenders for specific states or even zip codes. They charge each lender about $40-$50 dollars for every customer they refer to them. They will send your info to 4-5 different lenders. It may not be lenders that can necessarily help with your specific situation (ie recent bankruptcy, self employed, low down payment needed, etc). So, you may not really get directed to the right group of lenders.

I do not originate loans anymore but I am partnered with various lenders for my web site. My site asks specific questions that can help to fully understand what is going on with the person. I look at the situation for each person and then connect them with ONE lender ... but the right one for that scenario. Seems to work well for everyone.
I'm guessing..  
FatMan in Charlotte : 8/15/2018 1:51 pm : link
your 810 credit score is probably as accurate as the stat that QB's in preseason complete 70% of their passes.
Aren't closing costs supposed to be itemized?  
ij_reilly : 8/15/2018 2:01 pm : link
I'm buying a condo in Atlanta. We should close Monday.

Same rate, the standard 20% down.

Your closing costs sound high. I had a detailed breakdown on closing costs very early in the process. Get that info if you don't have it.

My credit score is between 790 and 800.
I am telling you  
allstarjim : 8/15/2018 2:11 pm : link
That in order for Fannie Mae/Freddie Mac to purchase condo mortgages, unless that condo association meets their guidelines for their reserve account, you will end up paying at least 25% if not 30% down, because Fannie and Freddie are the largest mortgage purchasers in the industry and the lender wants a salable note. This will not be your primary residence, correct? Also a big factor.

The condo association not meeting the Fannie Mae guidelines/threshold is the issue. I can't get too deep into the weeds on this because I am not a lender but I have encountered this same issue before representing a buyer...and this is the case with condos, it is SPECIFIC to condos, and your mortgage broker is probably being straight with you.
By the way  
allstarjim : 8/15/2018 2:16 pm : link
the rules that have created this atmosphere were because of the housing crisis in '08. Fannie and Freddie purchased a bunch of mortgages that went bad. A great number of those were condo mortgages. Buyers' would default, the condos would fail because they didn't have enough money in reserves to recover and pay for upkeep and maintenance because the deed holders weren't paying their dues and defaulting, the values tanked, and now Fannie and Freddie were holding onto worthless paper.

The new rules were made to mitigate their risk of that happening again. So it's 25% if a condo is a secondary residence and/or if the association does not meet reserve requirements and other capacity criteria. Lender should be able to explain this to you.
RE: Aren't closing costs supposed to be itemized?  
allstarjim : 8/15/2018 2:18 pm : link
In comment 14039842 ij_reilly said:
Quote:
I'm buying a condo in Atlanta. We should close Monday.

Same rate, the standard 20% down.

Your closing costs sound high. I had a detailed breakdown on closing costs very early in the process. Get that info if you don't have it.

My credit score is between 790 and 800.


You are buying it as a primary residence or secondary residence? Primary residence...the down payment for conventional lending 20% is probably right, and your specific condo association may meet all Fannie Mae guidelines.
RE: By the way  
EricJ : 8/15/2018 2:24 pm : link
In comment 14039864 allstarjim said:
Quote:
the rules that have created this atmosphere were because of the housing crisis in '08. Fannie and Freddie purchased a bunch of mortgages that went bad. A great number of those were condo mortgages. Buyers' would default, the condos would fail because they didn't have enough money in reserves to recover and pay for upkeep and maintenance because the deed holders weren't paying their dues and defaulting, the values tanked, and now Fannie and Freddie were holding onto worthless paper.

The new rules were made to mitigate their risk of that happening again. So it's 25% if a condo is a secondary residence and/or if the association does not meet reserve requirements and other capacity criteria. Lender should be able to explain this to you.


Not quite. In short, here is how it went...
1. Politicians wanted to make sure that ALL Americans could somehow purchase a home if they wanted.
2. They forced lenders to offer subprime products. If they didn't, the lending institution would be fined daily.
3. Lenders developed those products but knew they were risky. So, they did not keep them in their portfolios. They bundled them in groups of 1000, got a rating on them (which turned out to be bullshit) and then sold them to investors (not Fannie and Freddie).
4. Investments went bad, the market crashed and the politicians blamed the lenders. Yes, some of them saw the opportunity to go overboard and develop programs over and above what was required.
5. The regulations got OVER tightened to the point where self employed individuals could not even refinance a home they were already living in.
6. Now, we are in a place where there are at least bank statement loans for self employed, FHA for individuals who have little to put down, USDA for rural (zero down), VA, etc
One possible partial reason for high closing costs  
njm : 8/15/2018 2:25 pm : link
My condo association assesses a 2 month maintenance fee along with a $500. move in fee for new owners. That wouldn't get closing costs to where you say they are, but it would help.
RE: RE: By the way  
allstarjim : 8/15/2018 2:44 pm : link
In comment 14039876 EricJ said:
Quote:
In comment 14039864 allstarjim said:


Quote:


the rules that have created this atmosphere were because of the housing crisis in '08. Fannie and Freddie purchased a bunch of mortgages that went bad. A great number of those were condo mortgages. Buyers' would default, the condos would fail because they didn't have enough money in reserves to recover and pay for upkeep and maintenance because the deed holders weren't paying their dues and defaulting, the values tanked, and now Fannie and Freddie were holding onto worthless paper.

The new rules were made to mitigate their risk of that happening again. So it's 25% if a condo is a secondary residence and/or if the association does not meet reserve requirements and other capacity criteria. Lender should be able to explain this to you.



Not quite. In short, here is how it went...
1. Politicians wanted to make sure that ALL Americans could somehow purchase a home if they wanted.
2. They forced lenders to offer subprime products. If they didn't, the lending institution would be fined daily.
3. Lenders developed those products but knew they were risky. So, they did not keep them in their portfolios. They bundled them in groups of 1000, got a rating on them (which turned out to be bullshit) and then sold them to investors (not Fannie and Freddie).
4. Investments went bad, the market crashed and the politicians blamed the lenders. Yes, some of them saw the opportunity to go overboard and develop programs over and above what was required.
5. The regulations got OVER tightened to the point where self employed individuals could not even refinance a home they were already living in.
6. Now, we are in a place where there are at least bank statement loans for self employed, FHA for individuals who have little to put down, USDA for rural (zero down), VA, etc


You are talking about the over-arching causes of the housing crisis. I am talking about the reasons for specific rule changes by Fannie Mae and Freddie Mac covering condos and their associations for them to purchase their mortgages. Two different things, although both related to the crash.
RE: RE: By the way  
allstarjim : 8/15/2018 3:00 pm : link
In comment 14039876 EricJ said:
Quote:
In comment 14039864 allstarjim said:


Quote:


the rules that have created this atmosphere were because of the housing crisis in '08. Fannie and Freddie purchased a bunch of mortgages that went bad. A great number of those were condo mortgages. Buyers' would default, the condos would fail because they didn't have enough money in reserves to recover and pay for upkeep and maintenance because the deed holders weren't paying their dues and defaulting, the values tanked, and now Fannie and Freddie were holding onto worthless paper.

The new rules were made to mitigate their risk of that happening again. So it's 25% if a condo is a secondary residence and/or if the association does not meet reserve requirements and other capacity criteria. Lender should be able to explain this to you.



Not quite. In short, here is how it went...
1. Politicians wanted to make sure that ALL Americans could somehow purchase a home if they wanted.
2. They forced lenders to offer subprime products. If they didn't, the lending institution would be fined daily.
3. Lenders developed those products but knew they were risky. So, they did not keep them in their portfolios. They bundled them in groups of 1000, got a rating on them (which turned out to be bullshit) and then sold them to investors (not Fannie and Freddie).
4. Investments went bad, the market crashed and the politicians blamed the lenders. Yes, some of them saw the opportunity to go overboard and develop programs over and above what was required.
5. The regulations got OVER tightened to the point where self employed individuals could not even refinance a home they were already living in.
6. Now, we are in a place where there are at least bank statement loans for self employed, FHA for individuals who have little to put down, USDA for rural (zero down), VA, etc


And by the way, Fannie and Freddie were the largest single purchasers and holders of those sub-prime mortgage securities and was the guarantor of a total $5 trillion of the nation's mortages in 2008...half of all mortgages in the United States...and all backed by the U.S. taxpayer. Yes, private investment houses held more all combined, but the two GSE's held the most by percentage when considering single entities.
twosteps  
X : 8/15/2018 3:58 pm : link
I had the exact same thing happen to me last year. Our loan was approved by the bank and everything was fine until it went to the underwriter. Because we were moving into a condominium with only 20 residents, they were concerned if a special assessment needed to be made. Our condo was built in 2003 and had a new roof, new AC but it was reaching that age where some things could go. The reserves were fine, over 75% of the units are occupied and not rentals (which is big deal in Florida) but the underwriter was concerned and wouldn't budge.

Long story short, I either had to come up with another $50,000 or go with another bank. I didn't have the money and went with another lender which sucked because my interest rate went up by almost 1% and had to pay a lot more in closing costs not to mention a much higher monthly payment. In my opinion,Dodd/Frank is making it too difficult with people with excellent credit and the ability to own a home much more difficult. This is not my first time either, I have bought and sold numerous properties and this is our 8th and final home.

There are a multitude of reasons why they may want 25%. How many units are rented? How are their financials? What are the HOA fees? If for some reason I ever do sell and but another condo, it will be one where there are many units.
RE: twosteps  
allstarjim : 8/15/2018 4:57 pm : link
In comment 14039952 X said:
Quote:
I had the exact same thing happen to me last year. Our loan was approved by the bank and everything was fine until it went to the underwriter. Because we were moving into a condominium with only 20 residents, they were concerned if a special assessment needed to be made. Our condo was built in 2003 and had a new roof, new AC but it was reaching that age where some things could go. The reserves were fine, over 75% of the units are occupied and not rentals (which is big deal in Florida) but the underwriter was concerned and wouldn't budge.

Long story short, I either had to come up with another $50,000 or go with another bank. I didn't have the money and went with another lender which sucked because my interest rate went up by almost 1% and had to pay a lot more in closing costs not to mention a much higher monthly payment. In my opinion,Dodd/Frank is making it too difficult with people with excellent credit and the ability to own a home much more difficult. This is not my first time either, I have bought and sold numerous properties and this is our 8th and final home.

There are a multitude of reasons why they may want 25%. How many units are rented? How are their financials? What are the HOA fees? If for some reason I ever do sell and but another condo, it will be one where there are many units.


I believe this is also related to the Fannie Mae guidelines, as well as owners vs renters occupancy %, and a bunch of other criteria. I researched a condo community in Pinellas that my client was buying, and every unit that was sold in the previous year or so was done with at least 25% downpayment or they paid cash. I got my client in there with a 20% downpayment, but I moved heaven and earth to do it. It took convincing the lender they had extra money (they were getting a sizable rebate from the utility company that I found in their budget), and a lot of convincing with the lender that because of that, they met the Fannie Mae guideline, and they finally agreed. It was a difficult deal but I saved my client around $35K out of pocket.
ThAnks to everyone who has responded  
twostepgiants : 8/15/2018 5:36 pm : link
This will be my primary residence
I feel confident that the 25% is accurate  
twostepgiants : 8/15/2018 5:38 pm : link
I am wondering why its so much money in closing costs

I have been provided a list but I dont lnow how to make much sense of it
Im considering getting a rate from another lender  
twostepgiants : 8/15/2018 5:46 pm : link
This one is from a mortgage broker.

Perhaps from a bank, on my own.

are these only lender closing costs  
allstarjim : 8/15/2018 6:20 pm : link
or your all-in closing costs? What is your portion of the pro-rated taxes looking like? Association fees, estoppel, insurance premium? Some of it can't be changed, your lender may be able to help you on others. It's important that whoever you talk to give them the specific property, price, fees, and insurance quote...as much detail as possible. Also, many lenders overshoot it a bit on the good faith estimate because they would rather quote you a little over and you be happy that you didn't have to pay quite as much rather than quote you not enough and have you pissed that you have to pay more.
Not to miller the thread, I have a condo question also  
Bleedin Blue : 8/18/2018 12:44 pm : link
I’m going to relocate to VA. and will be downsizing to a condo. I saw a while back mentioned that there is an insurance policy you can purchase to protect you from one time major improvement expenditures. I think that that's what was said. If the y change the kitchen in the clubhouse or equipment in the gym, and decide to bang each condo owner a flat fee, the insurance policy covers that??? Always been a homeowner, first time prospective condo owner.
If there were going to be higher upfront costs  
gidiefor : Mod : 8/19/2018 1:11 pm : link
from the Condo association -- your attorney should have let you know about the Condo's financials prior to letting you sign the contract

by the way  
gidiefor : Mod : 8/19/2018 1:17 pm : link
you cannot compare condo costs to coop costs -- they are different animals

you don't need title insurance with a coop -- you do with a condo -- $2-3,000 of your closing costs are going to be title searches and insurance -- and recording fees - also if you are borrowing more money than you did for your coop -- you will have higher mortgage tax too

ask what the specific breakdown of your closing costs are -- the lender must provide you with a CD that explains it all

if you have an origination fee, points, high bank fees -- it will show up there

if the escrows are causing it - it will also show up there

have you and/or your attorney read the Condo Prospectus? that should list all the fees associated with your condo at closing -- that will not change no matter which lender you use
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