Cobalt Mortgage, a Kirkland,WA-based mortgage bank and a preferred lender of Seattle Condos And Lofts, is now offering 3% down payment conventional loans for condo purchases.

In addition to the low down payment, another feature for borrowers is the ability to pay the mortgage insurance premium in one lump sum upfront. While it would add to a buyer’s closing costs, it would be less expensive over the long run and would reduce the monthly payment by up to a few hundred dollars (depending on loan amount). For a $200,000 loan with a well-qualified buyer, the upfront mortgage insurance fee would be approximately $5,400 with no monthly mortgage insurance payment.

The program also allows a seller’s contribution of up to 3% of the sales price towards the buyer’s closing costs, which may include the upfront mortgage insurance amount.

Unlike FHA, Cobalt’s 3% down program is available to all condo properties, provided the condominium meets Fannie Mae guidelines.

So what’s the catch? The tradeoffs for the lower down payment are added fees and a higher interest rate given the higher loan-to-value amount, but it’s still competitive. It’s best suited for well-qualified borrowers, those with high credit scores (740 and higher), who do not have available funds for a sizeable down payment.

Want to learn more? Contact us today and we’ll have our preferred partners at Cobalt Mortgage provide you with the details!

Now, buyers who hope to purchase a home with FHA’s low down payment loan program are getting frustrated that fewer condo buildings are now FHA approved.

For buyers like Kristy Fender, of Chicago, FHA certification is a must-have on her list, and not just because it lets Fender and her fiancé, Dan Harvey, make a smaller down payment on a home purchase. She also figures that in approving buildings the FHA is doing the due diligence that she would otherwise have to do.

That’s amplified by the fact that many associations haven’t taken the initiative to obtain FHA approval, do so poorly, or encounter problems related to distressed properties.

The number of rejected buildings is adding up, due to bad paperwork and bad balance sheets as an increasing number of condo associations struggle with rentals, short sales and foreclosures. It is jeopardizing the plans of condo sellers who rely on the FHA’s stamp of approval as a marketing tool and condo buyers who either want or need an FHA-approved building.

Condo financing has become more complex and challenging for buyers (and sellers) since FHA and Fannie Mae tightened their condo qualification guidelines. With conventional condo loans requiring at least 10% down, FHA has been a favorable option for condo buyers.

But…

Some associations are deciding that the effort and the expenses tied to the application process, which can run into the thousands of dollars, aren’t worth the payoff and are letting their certifications lapse.

It behooves associations and sellers to be proactive with their condo building’s FHA certification, which is more significant now as record low interest rates are encouraging first-time buyers into the market place, many of whom gravitate towards FHA approved condos. And, it doesn’t have to be a complicated process.

We can help.

We’ve team up with a respected, local mortgage company who will take the reigns of the certification process at no cost to the association, seller or buyer. Whether you’re a buyer considering purchasing, or an owner thinking about selling in a non-approved condo building, we can help. Contact us to learn more about this special program.

Last week, FHA got a reprieve from Congress, which reinstated the higher loan limits in 42 states through 2013. For the Seattle/King County area the loan limit is back to $567,500.

Unfortunately, Congress chose not to reinstate the higher limits for conventional loans (e.g. Fannie Mae and Freddie Mac). The conventional loan limit in Seattle/King Country will remain at $506,000.

Most single family and townhomes will qualify for FHA. The higher limit means an additional 92 properties are eligible. Of the 1,709 single family and townhome properties currently for sale in Seattle today, 70.6% are available under $567,500.

Condos are a different story as the building complex will need to be approved by FHA in order for purchases in those buildings to be eligible for FHA loans. Recent changes to FHA guidelines now require condos to undergo recertification every two years, so some buildings that were once FHA approve may no longer be.

As of today, per the HUD website, 408 condominiums buildings in Seattle are FHA approved, which has increased over the past year. Overall, less than half of the condo buildings in Seattle are FHA eligible.

Of the 873 condos currently available for sale in Seattle, 35% or 307 units, are FHA approved. Throughout King County, 42% of the condos units for sale are FHA approved.

>> View FHA approved Seattle condos listed for sale. *

* Subject to buyer verification

The following is from a HUD press release:

FRIDAY, JULY 22nd IS DEADLINE FOR AT-RISK WASHINGTON STATE HOMEOWNERS TO PRE-APPLY FOR UP TO $50,000, FORGIVABLE “BRIDGE LOAN” TO AVOID FORECLOSURE & HOLD ONTO HOMES

SEATTLE – This Friday, July 22nd, is the deadline for at-risk Washington state homeowners facing foreclosure as a result of a loss in income due to a change in employment or high medical bills to qualify for Emergency Homeowners’ Loan Program (EHLP) interest-free, forgivable “bridge loans” of up to $50,000 to bring their mortgages current and help them pay their mortgages.

The U.S. Department of Housing and Urban Development awarded Washington state some $56 million for “bridge loans” under the EHLP program. The average EHLP “bridge loan” is expected to be about $35,000 so as many as 1,500 eligible, at-risk homeowners at-risk could benefit from the program, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

“The clock is ticking for Washington state homeowners at risk of foreclosure,” said HUD Northwest Regional Administrator. “It is absolutely critical for them to get to the EHLP Web site at www.findEHLP.org before Friday, July 22nd, to pre-apply for an EHLP bridge loan. Simply put, it could be the difference between losing or holding onto their homes.”

At-risk homeowners interested in the EHLP “bridge loan” program should visit its Web site at www.EHLP.org or by calling EHLP at 855-FIND-EHLP (346-3345). By Friday, July 22nd, they must have completed and submitted the EHLP Pre-Applicant Screening Worksheet and the Third-Party Authorization to pre-apply.

EHLP funds will pay a portion of an approved applicant’s monthly mortgage including missed mortgage payments or past due charges including principal, interest, taxes and insurance. Only participating EHLP agencies found on www.FindEHLP.org are approved to accept Pre-Applicant Screening Worksheets. Homeowners should beware of scams. It is free to submit a worksheet or get assistance with completing the worksheet. Any company asking for money to assist homeowners with the EHLP application process is a scam. Contact information for participating agencies, the Pre-Applicant Screening Worksheet and more information on the EHLP assistance and its eligibility requirements can be found at www.FindEHLP.org or by calling toll free at 855-FIND-EHLP (346-3345).

To be eligible for an EHLP “bridge loan,” households may incomes of no more than 120 percent of area median income. For EHLP income limits in Washington state, see http://www.huduser.org/portal/EHLP/index.html

Due to expected high demand for EHLP “bridge loans,” interested homeowners will complete a Pre-Applicant Screening Worksheet first. If there are more potentially eligible pre-applicants than funding available, the worksheets will be entered into a random selection process. Homeowners will be randomly selected and invited to apply for EHLP. Unfortunately, some qualified homeowners will not be selected and some will complete an application but not be approved to receive assistance because they do not meet all of the requirements.

The EHLP program is being administered on HUD’s behalf by NeighborWorks America, a national nonprofit organization that, since 1991, has been committed to providing access to homeownership and to safe and affordable rental housing.

Conforming Loan Limit

The current conforming loan limit is temporary, enacted in 2008, and is set expire on September 30, 2011. A day after, on October 1, 2011, the $506,000 limit set by the Housing and Recovery Act of 2008 for King, Snohomish and Pierce counties will take effect. However, this is not guaranteed as the higher limit could still be extended. View limits for other counties.

How will this affect me?

If you’re purchasing a property and anticipate securing a conforming loan, you’ll need to come up with a larger down payment to meet the lower $506,000 loan limit. Otherwise, you’ll be in jumbo loan territory with higher rates. Fortunately, it will not affect the vast majority of Seattle area condo buyers where 85.2% of all condos sold in Seattle during the first half of this year were priced below $550,000.

FHA Loan Limit

In 2008, the FHA loan limit was temporarily increased to $567,500. It, too, will revert to the limit set under the Housing and Economic Recovery Act (HERA) as of October 1, 2011, unless it’s extended by Congress. For King, Pierce and Snohomish counties the FHA loan limit will be $506,000. FHA info and limits for other counties.

How will this affect me?

Today, you can buy a property priced up to $588,000 with FHA, assuming a 3.5% down payment ($588,000 x 0.965 = $567,420 loan amount). As of October 1st, the maximum price will decrease to approximately $524,350 in order to meet the $506,000 loan limit. And, if you’re financing closing costs, then the purchase price will be lower still. However, the net effect is negligible since less than 4% of condos purchased in the first half of 2011 fell within this range.

Keep in mind, the changes aren’t necessarily set in stone, they can still be adjusted. But, if you don’t want to take that chance and if you are in the $524,350 to $588,000 price range and using FHA, or if you’re looking to avoid a jumbo loan, then contemplating a 30-day closing period you have around 50 days to find a home and get under contract by the end of August. However, some lenders may tighten the time frame.

SEATTLE – September 15, 2010 – Families facing foreclosure will have the opportunity to meet with their mortgage lenders and get free one-on-one advice and resources from state- certified housing counselors at Mortgage Help Day on October 2.

Last year, over 30,000 families in Washington State lost their homes to foreclosure. With another wave of adjustable rate mortgages resetting and the economy still staggering, it is estimated that nearly 41,000 Washington homeowners are likely to face foreclosure this year.

To support homeowners and communities as well as build awareness around the need for changes in public policy to better stabilize our communities, Statewide Poverty Action Network (Poverty Action) and partner agencies are hosting Mortgage Help Day on October 2, 2010 from 10:00 A.M. – 4:00 P.M. at South Seattle Community College (map and directions).

The free event will connect homeowners with lenders and HUD-certified housing counselors, as well as help attendees understand the foreclosure process and take steps to help remedy the crisis. To date, lenders who will be attending the event include Chase Bank and Wells Fargo. Attendees should bring a photo ID, social security card, last two years of W-2s and tax returns, last two pay stubs and bank statements as well as all mortgage documents (note that pre-registration is required for translation services). For more information, call (206) 694-6794 or go to www.povertyaction.org.

“Because lenders, borrowers, homeowners and our communities all benefit if foreclosures are avoided, we are committed to helping vulnerable homeowners gain a broad range of options to maintain their housing,” said Bev Spears, Executive Director of Poverty Action. “Homeowners who are worried about losing their homes or are facing foreclosure should attend our free Mortgage Help Day to gain a deeper understanding about the process, timeline and options to avoid foreclosure.”

In addition to helping Washington homeowners understand and navigate the foreclosure process and possible options, Mortgage Help Day will highlight the overwhelming need for laws to help protect Washington homeowners from foreclosure. Poverty Action is promoting legislation that would create a mandatory mediation process in Washington State to give homeowners every opportunity to avoid foreclosure and maximize the ability for loan modifications. In 23 other states and municipalities around the country, this mediation process has helped 60 percent of participants avoid losing their homes.

The proposed changes, which are expected to go into effect this summer, include:

Increase in the mortgage insurance premium (MIP) from 1.75% to 2.25%. It’s an upfront fee that can be rolled into the loan. FHA will release additional information on January 21.

Increase down payment amount based on FICO score. To maintain FHA’s low 3.5% down payment option, borrowers will need a minimum FICO score of 580. For those with FICO scores below 580, the down payment will be 10%.

Reduce seller concessions from 6% to 3% (e.g. seller paid closing costs). According to the FHA, the current level exposes the agency to excess risk by creating incentives that inflates the appraised value. The change would bring FHA into conformity with industry standards.

For borrowers, the net effect of the proposed changes would increase the costs associated with an FHA backed loan. On the other hand, compared to conventional loans, FHA is still a lower cost option with more flexible requirements. Furthermore, with the other FHA condo guideline changes, the changes noted above may affect even fewer condo buyers.

Implementation has been postponed, again, to February 1, 2010. Additionally, some of the changes have been altered since they were first proposed.

FHA has revised its guidelines for condominium mortgages. The new guidelines will take effect with all case numbers assigned on and after February 1, 2010 December 7, 2009 November 2, 2009. (Note: the guidelines were initially scheduled to take effect on October 1, 2009 but have been delayed to February 1st.)

FHA is implementing a new approval process for condominium projects, and with it, the elimination of the “spot approval” process. Spot approvals were used by lenders to qualify an individual buyer’s condo purchase using FHA where the condo project was not previously approved by HUD/FHA. In its place is a new streamlined process, which may affect buyers, sellers/developers and homeowner associations.

With FHA loans becoming more prevalent with its low down payment and flexible eligibility requirements, condo buyers, sellers and their HOAs should keep these changes in mind. For instance, if an HOA has not yet conducted a reserve study, they will now need to do so if owners wish to sell to an FHA buyer, who are becoming an increasingly larger segment of home buyers.

Owner occupancy:
+ Prior to February 1st: 51% of the units must be owner occupied.
+ As of February 1st: 50% must be owner occupied or sold to owners who intend to reside in the unit.

Single owner status:
+ Prior to February 1st: No single entity may own more than 10% of the units.
+ As of February 1st: No more than 10% may be owned by one investor. This applies to builders that subsequently rent vacant and unsold units. This will not only affect the developer who intends to sell their unsold units, but also to existing unit owners in the project. For 2 or 3-unit buildings, no single entity may own more than one unit.

FHA Concentration:
+ Prior to February 1st: For projects over 30 units, no more than 10% may be insured by FHA; for projects with less than 30 units, no more than 20% may be insured by FHA.
+ As of February 1st: For projects with 4 or more units, no more than 50% (temporarily increased through 2011) 30% may be insured by FHA; for 2 or 3 unit projects, only one may be insured with FHA. The change increases the FHA concentration allowing for a greater number of FHA buyers/owners.

Reserve Study:
+ Prior to February 1st: No requirement. However, Washington State law requires homeowner associations to conduct reserve studies, though there is no enforcement provision.
+ As of February 1st: FHA will require that a current reserve study must be performed to assure adequate funds, which must not be more than 12 months old. This is a good change as it’ll incent the HOA to conduct a reserve study.

Insurance:
+ Prior to February 1st: The HOA must provide evidence of appropriate hazard, liability and flood insurance.
+ As of February 1st: The project must be covered by hazard and liability insured, and were applicable, flood insurance.

Other changes include:

Arrears: No more than 15% of the total units may be in arrears of their HOA dues (30 days past due).

Commercial space: Nore more than 25% of the property’s total floor area in a project can be used for commercial purposes.

Conversions: The one year waiting period is eliminated, though the project, including common areas, must be 100% complete.

Endorsement: At least 50% of the units must be sold prior to endorsement of any mortgage on a unit.

Legal phasing: Allows the owner occupancy percentage to be based on release phases.

Recertification: Project approvals will expire two years from the date it was placed on the approved condo list and must be re-certified every two years.

As it is currently written, once the two years are up and condos need to be re-certified, as well as those projects hoping to be approved, may run into an issue with the environmental review section of the guidelines. The guidelines do not allow for projects to be within 1,000 of a highway/freeway, within 3,000 feet of a railroad and within 1 mile of an airport. Potentially, this could affect numerous projects along I-5, Aurora Avenue and throughout Belltown. However, it’s likely the rules may be amended again within the next two years.

This is only intended to provide a high-level overview of the upcoming changes to FHA backed mortgages. For more specific information, including whether FHA is an option for you, please consult with a FHA mortgage specialist.

Sources: HUD Mortgage Letter 2009-19 (WORD download), Guild Mortgage Company, and the Talon Group.

Here’s a few highlights:

• Housing Finance Agencies such as the Washington State Housing Finance Commission and certain non-profits will be able to monetize the tax credit, offering a loan against the tax credit at the time of purchase, which buyers can apply towards the down payment.
• For buyers using other FHA-approved lenders, the monetized tax credit can only be applied in excess of FHA’s required 3.5% down payment or towards other closing costs. In other words, it cannot be applied towards the initial 3.5% down payment requirement. As a result, most people will be able to use the monetized funds for closing costs rather than towards the down payment.
• This option only applies to FHA-insured mortgages, not conventional loans. As such, it’ll benefit buyers of single family homes or townhouses more so than condos. The reason for this is that FHA-insured loans are only available to HUD-approved condos. With only about 300 approved buildings in Seattle, many condos are not eligible. Additionally, HUD limits the number of FHA-insured units in a condo complex to 10% (e.g. only 2 units in a 20 unit complex will be eligible for FHA).

While this particular monetization option isn’t likely to help Seattle condo buyers much, it’s definitely a great option for first-time buyers who are taking advantage of FHA-insured mortgage loans. At the very least, buyers can increase their down payment amount or cover closing costs. The recently passed state version would help condo buyers but that seems to be dead in the water at this point.

The $8,000 first-time home buyers tax credit will expire on November 30, 2009. So if you’re interested in taking advantage of the credit, keep in mind, there’s only about 4.5 months left to get under contract. Also, the King County courthouse will close beginning Wednesday, November 25th for the Thanksgiving holiday weekend, you’ll essentially need to close/fund/record the purchase by November 24th to qualify for the credit.

More information:
HUD/FHA: Donovan announces recovery act’s homebuyer tax credit can immediately help thousands of first-time homeubyers to buy a home
SeattlePI.com: Feds will allow tax credit for down payment, closing costs

A couple of weeks ago I mentioned the new 0.75% add-to mortgage fee for condo purchases with less than 25% down, or more than 75% loan-to-value. Now, if you’re purchasing a property as an investment (that is, not your residence) there is an additional 1.75% fee for loans greater than 75% loan-to-value. Combined, that’s up to another 2.5 points on top of the mortgage interest rate if you have less than a 25% down payment. Though, if you’re getting a great deal on a unit, even with the 2.5 points, it could still pencil out.

Update 2/6/09: Fannie Mae updated guidelines, will now allow up to 10 financed properties with a 720 credit score and 70-75% maximum loan-to-value depending on transaction and property type. In addition to higher fees, there’s also a restriction on the number of investment properties held with mortgages to no more than four. If you already own four or more properties and are looking to add another one to your portfolio, you may not be able to find a willing residential lender.Course, if you’re a cash buyer, you’re golden.

Finally, there’s an added fee if you have a credit score below 720; Investor or not, there could be an additional fee ranging anywhere from 0.5% to 3%.

Unfortunately, the looming financial crisis and banking bailouts haven’t yet translated to actually assisting would-be buyers and sellers.