What is the difference between a Single Family Residence and a Condo?
A Single Family Residence (SFD) is a home whereby the owner owns the interior and the exterior and the land around it that constitutes the lot or parcel. With a Condominium (Condo), the homeowner owns the interior of the unit but the exterior is owned and operated by the Condominium Association. A homeowner needs to cover the home’s interior and exterior with replacement insurance call Homeowner’s Insurance or Hazard Insurance. A Condo owner only need to cover the interior with their own Homeowners Insurance. The exterior of the Condo is cover within the Blanket Policy provided by the Homeowners Association. The Condo owner will have a monthly Homeowners Association Fee or dues to cover the eternal insurance and the upkeep and care of common elements (like hallways and fitness rooms or pools) as well and maintenance items like gardening, grass cutting, landscaping, etc. Parking can be a normal fee as well. The Homeowners Association Establishes rules and regulations for the complex. A Condo can be a single free standing unit, a townhouse (side-by-side) unit, a four, eight and up to hundreds of units in a high-rise building. Some more elaborate Condos have pavilions, entertainment and more available to its members.
When Condos are in the building phase, and still owned by the developer, this is called a Non-Warrantable Condo. It is not warrantable because the ownership rights have not yet been turned over to the Homeowners Association (HOA). The HOA established the Articles of Incorporation, The Bylaws and the Budget. Non-warrantable Condos are fall into the realm of Non-Qualified Mortgages, so they are not purchased by FHA, Fannie Mae or Freddie Mac. Someone buying a Condo and needing a mortgage would need to find a lender who offers programs for Non-Warrantable Condos. The Pricing and other guidelines may differ from traditional programs and products.
What are some requirements for Condos?
- Owner Occupied
- Investment properties may be allowed if the Association allows it but there may be a limit per Condo Project
- FHA Program – will do a spot approval on a single unit
- VA – will do a spot approval on a single unit
- WHEDA - approved condominiums on a single unit warrantable only
- Non QM – will do a spot approval on a single unit Non-Warrantable
- Home Ready - approved condominiums on a single unit warrantable only
- Home Possible - approved condominiums on a single unit warrantable only
What Properties are Eligible for First Time Home Buyers/Affordable Lending Programs?
All programs are a good fit for Single Family residences, Condominiums (except USDA), Manufactured homes (not conventional), Town homes, and Foreclosed or Short Sale properties. For multi-unit properties most offer 1-2 Unit (except VA & USDA). For 3-4 Unit, you would need to go with an FHA or Conventional Program.
Experience is the most critical aspect when choosing the right professional to work with. With over 30 years of experience, I keep up with ever changing guidelines and help you select the correct program for your personal situation. I do this by taking the time offer program comparisons so you can make the best decision for you and your family. Furthermore, my team of highly trained operation professionals make the process seamless and stress free. When you work with Epic, you get the whole team effort to keep everything moving along according to plan. Communication is the key and we pride ourselves on top-notch communications along the way. I have dozens of handpicked investors and lenders so I can shop for you to obtain the best possible program with a fantastic rate that fits your needs. The educational process continues with suggested and at times required Homebuyer Education. I walk with you step by step throughout the process. Once my clients are approved, I help them with the buying process along with their Real Estate Agent or can recommend a great one to work with.
Advantages of a First Time Home Buyer Loan
FHA Loans
- 96.5% Financing (3.5% down payment)
- Upfront Mortgage Insurance Premium normally financed
- Monthly Mortgage Insurance (PMI) not determined by Fico (Conventional)
- FICO Scores down to 580
- Interest Rates can be less than Conventional loans
- No Pre-payment Penalty
- Low Closing Costs
- Less Than Perfect Credit Is Welcome
VA Loans
- 100% Financing ($0 down payment)
- No Monthly Mortgage Insurance (PMI)
- FICO Scores down to 580
- Lower Interest Rates than Conventional loans
- No Pre-payment Penalty
- Low Closing Costs
- Less Than Perfect Credit Is Welcome
- Loans Up To $2,000,000
WHEDA Loans
- 97% Financing (3% down payment)
- 3% Second Mortgage allowed (making the down payment $0)
- Discounted Monthly Mortgage Insurance (PMI)
- Income Restricted to 80% County Medium Income for lower PMI
- 100% County Medium Income use traditional PMI
- Household Income Used to Qualify
- FICO Scores down to 620
- Lower Interest Rates than Conventional loans
- No Pre-payment Penalty
- Purchase Price Limits exist
- Homebuyer Education Required
Non-QM Loan
- 95% Financing (5% down payment)
- Traditional Monthly Mortgage Insurance (PMI)
- Qualifying income used (only the borrower on the loan)
- FICO Scores down to 640
- No Pre-payment Penalty
Conventional Loans First Time Home Buyer Loans
Home Ready (Fannie Mae) & Home Possible (Freddie Mac)
- 97% Financing (3% down payment)
- Discounted Monthly Mortgage Insurance (PMI)
- Income Restricted to 80% Area Medium Income (use look-up tool on-line)
- Qualifying income used (benefit: can use only the borrower on the loan)
- FICO Scores down to 620
- Lower Interest Rates than Conventional loans
- No Pre-payment Penalty
- Homebuyer Education Required
Conventional Loans Traditional
Fannie Mae or Freddie Mac
- 95% Financing (5% down payment)
- Traditional Monthly Mortgage Insurance (PMI)
- FICO Scores down to 620
- No Pre-payment Penalty
Loan Approval Process Explained
Set an appointment with a Mortgage Advisor who is an expert in consultation. You will be given a checklist of documentation to start the process.
A general list would include:
- Condo Questionnaire completed by the Association to make sure it meets guidelines
- If things fall into place , your lender can do a Streamline Approval
- In many cases the lender will request the Bylaws, Articles of Incorporation, and Budget
- Some associations require this process be done on an on-line system and there can be a fee associated with this process
- 2 years most recent W2’s or 1099’s
- 30 days most recent paycheck stubs
- 2 most recent bank statements and your driver’s license
- If you are an independent contractor, 100% commissions, or self-employed you will need to supply the last two years federal tax returns.
- With some programs it is good to strengthen the file with other assets statements like investments, stocks and retirement accounts.
- Once those items are provided and reviewed and we run your credit report and submit your loan into the automated underwriting system for approval.
- We then provide you and your agent with a preapproval letter within 24 hours.
- Once pre-approved, you should contact your Real Estate Agent and provide your specifications of the home of your dreams.
- Once you received an accepted offer to purchase, you or your agents will send all of the contractual documentation to us.
- We will send you a Loan Estimate estimating and summarizing your loan numbers minus any credits you will receive at closing.
- We will then submit your loan to underwriting. You will receive a Conditional Approval within a couple of days.
- A conditional approval can require things like Title Appraisal, Homeowners Insurance, and proof of earnest money.
- Once all of those conditions are met, your loan will go back into underwriting for Final Approval. Upon receipt of Final Approval and no later than 3 days prior to closing your will get a Preliminary Closing Disclosure.
- Once we get the final Settlement Statement from the Seller-side, we will provide you with a Final Closing Disclosure.
- Closing will be scheduled normally at a Title Company.
- As soon as the VA loan conditions have been gathered and the underwriter signs them off, then approx. 24-48 later the final loan documents will be drawn up and will need to be signed in the presence of a notary.
- At that point, you will then be instructed to wire the funds needed to close on your purchase to title/escrow and will officially close on your purchase within a day or two later.
What else should I know about Condo Loans?
The Homeowners Insurance is cheaper because it only covers the interior of the unit. The HOA fee can run anywhere from $100 per month to over $700 per month depending on the amenities offered. This can obviously affect one’s debt-to-income ratio in qualifying for a mortgage.
Condotels are condos that are used for seasonal living and are rented out all or the rest of the year. There are not many lenders who will finance these, so make sure you bring this up with your Mortgage Loan Officer.
