These are not so much new rules but a return to old rules.
By Polyana da Costa · Bankrate.com Tuesday, October 16, 2012Posted: 1 pm ETCondo buyers and self-employed borrowers may soon have to jump through additional hoops to get a mortgage as Fannie Mae tightens underwriting standards.
Starting Oct. 20, borrowers who put less than 20 percent down on a condo will have to provide documentation to demonstrate that the homeowners association is financially stable. Fannie currently requires the info for buyers putting less than 10 percent down. The documentation includes a reserve study to show that the association has enough cash saved for emergencies, a request for proof that the association has adequate insurance and a questionnaire detailing the association’s finances.
No matter how good a credit history you have, if the association of the building you are buying into is perceived as financially risky, your mortgage deal is dead.
On the other hand, why would you want to buy a condo in a building that has financial issues? If you are thinking about buying a condo, here are a few things to consider.
Self-employed
The latest underwriting changes will also affect borrowers who are self-employed or receive most of their pay based on commissions.
As of Oct. 20, self-employed borrowers will be asked to submit two years of personal tax return when they apply for a mortgage. Currently, borrowers need to provide tax returns for the most recent year.
The requirement can be an obstacle for borrowers who earned enough to qualify for a mortgage in the last year or so but went through financial difficulties in a previous year.
Fannie claims the tighter standards are needed to minimize its risks. What do you think of the changes?
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Proprietary OC Housing News home purchase analysis
570 South CALLE DE CASAS Anaheim, CA 92807
$449,000 …….. Asking Price
$259,500 ………. Purchase Price
12/8/1998 ………. Purchase Date
$189,500 ………. Gross Gain (Loss)
($20,760) ………… Commissions and Costs at 8%
============================================
$168,740 ………. Net Gain (Loss)
============================================
73.0% ………. Gross Percent Change
65.0% ………. Net Percent Change
3.9% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$449,000 …….. Asking Price
$15,715 ………… 3.5% Down FHA Financing
3.40% …………. Mortgage Interest Rate
30 ……………… Number of Years
$433,285 …….. Mortgage
$120,552 ………. Income Requirement
$1,922 ………… Monthly Mortgage Payment
$389 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$112 ………… Homeowners Insurance at 0.3%
$451 ………… Private Mortgage Insurance
$240 ………… Homeowners Association Fees
============================================
$3,114 ………. Monthly Cash Outlays
($283) ………. Tax Savings
($694) ………. Equity Hidden in Payment
$17 ………….. Lost Income to Down Payment
$76 ………….. Maintenance and Replacement Reserves
============================================
$2,230 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,990 ………… Furnishing and Move In at 1% + $1,500
$5,990 ………… Closing Costs at 1% + $1,500
$4,333 ………… Interest Points
$15,715 ………… Down Payment
============================================
$32,028 ………. Total Cash Costs
$34,100 ………. Emergency Cash Reserves
============================================
$66,128 ………. Total Savings Needed
The property above is available for sale on the MLS.
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