Here’s an overview of FHA benefits and requirements. The following is only a summary about the program and should not be considered exhaustive. Although, this provides a good starting point for buyers, for more concise information regarding FHA, please consult your loan officer.

Benefits of FHA loans:

 

• A minimum investment of 3%. This can include a combination of borrower paid down payment and closing costs, or gift funds. Most conventional loans today require 5% down or greater, not including closing costs. Some costs are excluded such as discount points, prepaid items, seller paid closing costs, etc. This rate will increase to 3.5% effective January 1, 2009.
• No minimum FICO requirement, making loans available to those who don’t have high enough FICO scores for a conventional loan.
• More lenient qualifying ratios of 31% front-end (gross income / PITI) and 43% back-end (gross income / PITI + other monthly liabilities). The conventional loan qualifying ratios are 28% and 36%, respectively. FHA allows buyers to use a higher percentage of their income towards housing costs.
• People with bankruptcies may qualify. For Chapter 7, borrowers may be eligible two years from the discharge date. For Chapter 13, borrowers may be eligible while in repayment status.
• Allow for seller concessions and contributions up to 6% of the sales price. This is above and beyond the buyer’s 3.5% contribution. Examples of seller constributions include closing costs, prepaid expenses, discount points and interest rate buy-downs.
• Cash reserves are not required, except for 3 or 4-unit properties.
• Gift funds are acceptable. All funds can come through via a gift; the gifter must be someone close to the buyer such as family, significant other or friends with a justification letter.
• Loans are assumable, provided the prospective buyer qualifies.
• There is no pre-payment penalty.

Specific to FHA:

FHA loans are subject to a maximum amount depending on location. For King, Pierce and Snohomish Counties, the maximum loan amount is $567,500 through December 31, 2008 (as part of the housing stimulus bill). Thereafter, the maximum loan amount will likely be around $506,000.

FHA requires two types of mortgage insurance premiums (MIP) - up-front and annual. The up-front MIP is 1.75% of the base loan amount and can be added to the total loan amount or paid in cash at closing. The annual MIP is termed annual but paid monthly. On a 30-year fixed the premium is 0.5% of the base loan amount, which is applicable for a minimum of 5 years and cancelable when LTV reaches 78%. Two important notes regarding the annual MIP: 1) even if the LTV drops below 78% the buyer must wait 5 years before they can cancel the MIP, and 2) it cannot be canceled for condos.

One loan limitation. FHA only insure loans for principal residences, so buyers are limited to one FHA loan at a time. There are exceptions for relocation, increased family size, divorce and if the borrower is a non-occupant co-borrower.

Who is eligible for FHA?

• U.S. citizens
• Permanent resident aliens
• Non-permanent resident aliens - must have an SSN and hold a valid visa or is eligible to work in the US as evidenced by an EAD issued by the U.S. Customs and Immigration Service. Acceptable visas include H1, L-1, E-1, TN, A Series and G Series.

FHA is not available to non-citizens who do not have lawful residence in the U.S. or individuals with diplomatic immunity.

FHA Enhancements:

As a result of Congressional reform actions this year, several enhancements were made to the FHA program. The FHA appraisal requirements were relaxed, the required $150 seller fee is no longer necessary and processing and underwriting were streamlined and standardized. Other changes include the expanded qualifying ratios, the increase in borrower investment from 3% to 3.5% (delayed) and a change in the up-front MIP percentage.

FHA and Condos:

For condominium purchases the condominium development must be approved by HUD in order to be eligible for FHA loans. To view a list of approved condos, click here. In Seattle, there are currently 325 condominiums that are HUD approved, though the list may not be up-to-date. However, FHA spot approvals for condos are becoming increasingly utilized, primarily for resales. Lenders can receive a case-by-case spot approval provided the condo meet certain qualifications, which does limit the number of condos that are available under the program. For spot approvals, generally the development must be at least 51% owner occupied, 90% of the units have sold, the HOA has existed for at least 1 year, must have been converted for at least 12 months (if a conversion), plus a number of other requirements. While there are some hurdles, it is an often overlooked mortgage option and worth looking into.

Fortunately, developers are paying heed. New developments like Thornton Place applied for HUD approval and expects to receive acceptance shortly, if not already. Developers of a number of conversions have also applied for HUD approval as many now meet the guidelines.

Given the ever constricting conventional mortgage loan availability, FHA is becoming an appealing option for many buyers, particularly here in the Northwest. For more information or questions about FHA, we recommend buyers speak to a mortgage loan officer who has experience with FHA loans.

Here’s a few recent FHA resources from the ‘net:
- Let FHA Loans Help You, the official HUD/FHA website
- A Solution for FHA Buyers Searching for a Down Payment, The Mortgage Porter
- FHA is waiting to give you a loan, The Seattle PI
- FHA financing SHOULD be KING - If agents are ready, The Seattle Specialist

During a standard home or condo inspection our focus is on owner education with an emphasis on recommended safety upgrades. This is particularly important if you have elderly parents and/or small children living with you and if your home was built 20+ years ago. The building requirements (codes) have changed considerably over years, drastically reducing the number of fires, shocks, fall hazards and deaths as a result.
 
1. Make sure smoke alarms are operable.
If your smoke alarms are more than 10 years old the National Fire Protection Association recommends they be replaced. Older installations only have alarms on each floor and outside each bedroom. Today, requirements call for smoke alarms to be hardwired with battery backup in bedrooms, hallways and on each floor. The newer requirements have drastically decreased burns/fires from scenarios such as candle fires or smoking in bed.

2. Know where to shut off the gas.
If you are in a condo ask your homeowners association what to do in case there is a gas leak at your fireplace, water heater or gas cook top. These items generally have an external shut off separate from each device but if you don’t know where it is ask the HOA or review the owner’s manuals. Also there should be a gas shut off valve below your gas meter which will turn off the gas to your entire home, and you’ll need a wrench to turn it off. When turning the gas back on, it’s recommended that it’s done by a professional gas service provider.

3. Know where your water shut off valve is.
Water leaks are a big area of concern, especially if you’re considering upgrading the toilets, sinks, and so forth. Often times the shut off valves for these older systems can be frozen or easy break during construction and the next shut off valve location can be buried under the house or out in the street somewhere. It’s important to know where this valve is and how to turn it off when the need arises.

4. Know how to shut off water flow to the hot water heater.
If you have a hot water leak you’ll need to have clear access to the water heater and the shut off valve on top of the water heater. Shutting off water flow to the water heater will stop the out flow of hot water immediately; otherwise you will be draining the system before the water flow stops. A useful tip to decrease the hot water flow in the leakage area is to turn on the water where it’s draining properly somewhere else, like a shower or sink.

5. Know where your electrical panel is and how to shut it off.
The electrical panel, which contain circuit breakers, is usually located in a closet, bedroom, utility room, the basement and in some cases, outside the dwelling. Inside the panel, look for a large breaker. This is the main electrical disconnect and turns off all of the power for your home (depending on the size of the house the breaker is probably at the top and has a number, either 100 or 200, representing amperage rating). In condos, individual units may not have a main electrical disconnect, but instead have individually labeled breakers for different zones in the unit (e.g. bedrooms, kitchen, bathroom).

Prior to working on any electrical elements in the home (e.g. changing receptacles, cover plates, light fixtures), it’s important to shut off the circuit breaker to prevent an electrical shock or even a house fire. A good rule to live by when working with your home systems is, when in doubt call a professional.

In essence, the revision adds a section regarding comment spam and reiterates and clarifies comments which are deemed inappropriate. Additionally, the blog name has been updated as the policy had referenced the previous name, Seattle Condos and Lofts.

Another objective is to transform the site in to Seattle’s most comprehensive condominium (plus lofts and townhomes) resource. To that end, we plan to integrate additional features such as video reviews, podcasts and expanded topics. We’ll also have more contributing writers as well.

Let’s take a closer look at the new design.

The first column, on the far left hand side, contains our “Featured” articles. These are special articles such as condo reviews, major news stories, legislative updates and so forth. Below the Featured article section is the new video section, which will contain the most recently added videos. To start, look for condo marketing videos, but eventually, we’ll be adding video reviews.

The second, or middle, column provides the latest postings by category. This is where you’ll want to go to find the most recent articles posted to specific categories. We’ll also occasionally post community events and TSCB news at the top of the column.

The third column located on the far right hand side is very similar the old design. In this column you’ll find recent comments, a list of recent posts, the most read posts, the site search function, our blogroll and our newsletter subscription field. If you want to see the most recent posts in chronological order, be sure to check out the “Latest Posts” tab. In additionally, we’ll provide space for public service announcements for non-profit organizations such as the Seattle Animal Shelter and Children’s hospital, as well as, condo-related advertisements.

New TSCB Format

Finally, the category links which used to be located in the right column has been moved to the top navigation bar with sub-categories located within a drop down menu.

Note: Still need to fix the condo listing, about and contact pages

Many people feel there isn’t a need to inspect new construction because the home has been “Code” inspected by the city. And, to a certain degree this inspection could be accurate but here’s my take as a home inspector and as a potential buyer.

As a buyer, purchasing a home and scheduling a move is stressful enough without having to worry about potential structural issues. The cost of a new construction home inspection runs with median home prices in the Puget Sound area. So, with a median price around $400,000, a new home inspection runs approximately $400 (condos inspections are generally priced lower than single family homes). Thus, you’ll gain additional peace of mind for roughly a tenth of a percent of the price of the property for an inspection.

Now here’s my impression as an inspector. I have been inspecting properties for over 8 years and haven’t found a single one without a problem. Small or large, most need some sort of attention to prevent a safety hazard or a potentially significant financial investment if not tended to in a timely manner. With new construction a list of corrections can be just that, a simple punch list with photos to assist the buyer and contractor to ensure all details were corrected by the time of the final walk through. Also, since the home is new, systems and appliances haven’t been thoroughly tested or used to ensure they’re functioning properly before you move in.

Here’s a sample list of items that would be tested during the inspection: run water throughout in the home, flushing toilets, test appliances for proper installation & function, test the furnace and heat distribution, the fireplaces, review in the attic/roof and crawlspace areas (single family homes).

If you have any questions, or if you’d like to view a sample new construction report, feel free to contact me.

The presentation center is located at the Skyline Tower at 10900 NE 4th Street, Suite 1510 in Bellevue.

Bellevue’s Essex on the Park (website) announced they have released an initial set of homes available for reservations. The initial release will include just 16 condominium homes with the remainder being held back until completion in 2010. Essex will be hosting special design preview events on April 8th, 9th and 10th for individuals who previously registered on their website.

Essex will rise just 9-stories featuring 32 two- and three-bedroom homes that range in size from 1,100 to 2,700 sq ft. Prices for Essex homes start from $800,000 and will likely top more than $3,000,000.

In addition, Bellevue Towers is offering a limited-time rate lock promotion. For homes purchased in March and April they’ll lock interest rates for free. Alternatively, buyers can apply the rate lock cost (approximately 1% of the purchase price) to buy down rates or apply it to closing costs.

Bellevue Towers report they just poured the 38th floor and expect to top off the project in another two months.

Illustration of Bellevue Towers’ roof top Urban Garden designed by Walker-Macy.

A reserve study identifies the major maintenance, repair, and replacement expenses that an association will incur over time that are not practical to include in an annual budget. The purpose of a reserve study is not to inspect for defects, but to evaluate the expected cost of future repair and maintenance of common elements.

The State House and Senate have similar bills that would authorize, and in some cases require, homeowner associations to conduct reserve studies, establish reserve accounts and require resale certificates (or seller’s disclosure) to include a copy of the most recent study or disclose that a reserve study does not exist. Currently, reserve studies are optional.

These are needed consumer protection bills. More often than necessary condo buyers are surprised to learn of major repairs and incur significant assessments for issues not disclosed. Requiring reserve studies to be furnished with the resale certificate will allow buyers to make a more informed purchase decision.

I have more information about these bills on the Buzz.

Also, Farren’s SCL article provides a good overview of reserve studies.

With that said, however, recent events and the state of the condo market are on the minds of developers. R.C. Hedreen, Olive 8’s developer, is ensuring that buyers in Seattle’s tallest residential tower receive the lowest price possible as the market continues to fluctuate by offering a price guarantee to new buyers. Should the same floor-plan within Olive 8‘s remaining inventory sells for less than the current price prior to closing, the buyers who contracted for a higher price home will benefit at closing with the equivalent discount to their price.

Acccording to David Thyer, president of R.C. Hedreen, the Olive 8 homes are attracting a great deal of attention and interest, but “We recognize the housing market hesitancy and feel that this guarantee will help shore the confidence of those who are on-the-fence. Buying now offers the best selection and the assurance that they are getting a great value.”

One can think of a building envelope as being similar to envelopes used to mail packages through the postal service. A standard package mailing envelope is used to protect the interior contents from moisture, wind and damage while in transit. The building’s envelope acts like a mailing envelope by protecting the structure from rain, sleet or snow…so the saying goes.

A building’s envelope includes the walls, siding, flashing, roof, foundation and so forth. These systems should work together by providing a barrier between the interior of the structure and the exterior environmental elements such as rain and moisture. The installation materials and methods used in the building’s construction will determine how heat, air and moisture travel through the structure.

So, why is this important to me as a condo owner or potential buyer? Well, if the building envelope was not installed property and/or has begun to prematurely fail, it can lead to a whole host of problems including, but not limited to, moisture intrusion, wood rot and fungal growth.

Seattle and the surrounding areas are not immune to poor building envelope systems. One can find examples of building envelope failures while driving through the city. Just look for older buildings (5-10 yrs) that are newly wrapped with scaffolding and white fireproof material that resembles a giant tarp, sometimes labeled Tyvek or firewrap. This can often be tell tale signs there was a failure in the building envelope and/or siding system. The good
news is that it’s being fixed, hopefully by a reputable company who knows how to correctly repair/replace the items, followed a detail plan, and most likely created by a reputable architectural firm.

When considering purchasing a condo in a high rise building one should inquire with the seller or the Homeowner’s Association to verify whether there’s been a history of moisture intrusion (i.e. roof leaks, moisture intrusion around windows/doors/openings, fungal growth, etc). If there has been a history of any of the above mentioned details, get more details on the corrections. The KEY is to ask questions and obtain verification on work completed by a reputable company. Understanding this process can be overwhelming and that’s why we recommend assistance from a quality Realtor and home inspector. The last thing a buyer wants to happen is to purchase a condo then get hit with large assessment. Ask questions and get professional assistance, good luck…