Friday, January 30, 2009

Changes Again in Mortgage Financing for Condos

Brian Cumpton, RWF Wells Fargo Mortgage and guest blogger, keeps me up to the minute (almost annoyingly) on the lending information that matters most to my clients. He sent me this bit of good news the other day...

Condominium financing just became more expensive.

If you’re thinking of buying a condo or refinancing your current condo, the cost for mortgage financing has just gone up a bit.

Fannie Mae has just added a fee to condo transactions of .75% of a 30 year fixed mortgage, for borrowers who put down less than 25% for purchases and those that have less than 25% equity in the unit for refinances.

For an average loan amount of $300,000 the fee amounts to $2,250, or .375% additional to the interest rate. Borrowers can elect to pay the fee, which will be tax deductible, or roll the fee in to their interest rates, thus increasing the rate.

This all stems from the condo market showing the highest risk of default in this loan to value range. The fee has occurred in the past - more recently in the 90s-but as the market was appreciating in the 2000s there was less risk for default in the condo markets; hence there were no additional fees.

It’s a good time to purchase with home values down which can make up the difference in some respect. But keep in mind if you are putting less than 25% down for a new purchase it has just become more costly. This is also true for refinancing if the property does not have 25% equity in the home. The cost of the transaction is higher.

The past two weeks, interest rates have pushed up due to a few reasons. 30 year fixed mortgage rates are tied to bond prices - and have been mixed and volatile recently. The bond price trades on data within the economy and fear factors. Because of this, there is always volatility.

Please call me to receive a mortgage analysis of your situation. If you don't know your options, our conversation will empower your decision making.

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