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Non FHA Building Loan

Hi all,
There's a condo I'm interested in, but the building has an issue for lenders.  99 of the 168 units are still builder owned.  2007 build.  The HOA's are really low.  No legal issues that I know of.  My agent said no way I could get a loan on this building.  Then he turned me on to a broker that suddenly could do a loan.  I have pre qualified with a major lend for $180k just to get qualified in general.  This condo is $170k.  I haven't had much contact with this lender, except that he would have no problem with this particular building.  I haven't seen his rates yet though.  Should I be worried about a lender that will loan on a condo/building that most lenders won't?  My agent said he'd look over the loan to look for higher fees or anything out of the ordinary.  This is my dream condo in a building I love, but I'm worried it's some sort of shark loan etc.  Should I just stay away?  Thanks.
PS.  My credit is in low 800's with the ability to put 20% down.  No debt.
  • November 17 2011 - Cortez Hill
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Answers (11)

Since you are adamant about this project you might look into traditional financing. There is a possibility that the HOA is approved with FannieMae or Freddie Mac. Also, you may want to check with US Bank. They are fairly lenient with condominium requirements.

We have portfolio lenders that do not require a condo project to be approved by anyone. But, your loan amount is below $418,000 so that won't work.

Happy funding, Rudi
  • November 21 2011
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Hi, What state are you in? There are mortgage lenders that have different arrangements with the banks and can pull a rabbit out of a hat. Are there upfront costs to you that in the event you can't get this loan, do you loose the out of pocket money?
  • November 21 2011
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If you know your credit score or your overall credit rating, you can receive a quote and even a GFE without having your credit run.  Anyone who tells you they can't provide a quote to you without getting a full application and running your credit is lying to you.  Anyone of us can provide a quote to you in minutes based on information you provide to us within that period of time without spending a dime running your credit or taking an application.  

Of course the quote will be based on the information you provide.  If you're confident your credit score is in the 800's and even if your actual is as low as 700, the terms of the loan won't change that drastically.  Maybe a quarter to a half in fee, tops.  

I would suggest working with someone who wants to work with you.  Don't waste your time with difficult lenders.  Either they can do it or they can't and if they can do it, they know the terms right upfront.  Nothing should change.  If it sounds like boloney and smells like boloney, it's boloney.  
  • November 21 2011
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To Marvin, How many good faiths should I get?  With a few lenders, it seems to be like pulling teeth asking for a good faith with all the details.  And of course they all saying everything can change once we start the process.  Which I understand.  But I get the feeling the changes are going to be pretty large once they have me.  One lender even said if he knows I might go elsewhere, he's losing money on giving me a quote.  He'd rather know I'm going to get a loan from him before he puts in any effort.  I know this isn't big money, but I've been let down by the few I've been in contact with.  USAA pre qualified me, but their rates and fees aren't that great.  And even they said on the phone can be beat by a local broker.

How many times for a credit run is too many to affect my credit?  I'm low 800's now.
  • November 20 2011
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Just compare the good faiths of the various lenders, select the best one.
  • November 20 2011
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Sorry to respond to my own thread, but I figured I'd give an update.  I put in an offer for the asking price.  While my agent was talking to the selling agent, he mentioned the "problems" the building would have for lending.  She immediately responded that if the unit is "owner occupied", there should be no problems getting a conventional 30 year loan on this building.  News to us.  So I contacted another lender, not the possible "shark" I mentioned in the original thread.  Turns out this new lender had no problems giving a quote/loan for this building.  3.85% rate, 4.093 APR 30 year conventional.  $2900 lender fees.  $1100 third party fees.  (I'm a new buyer so NO idea if this is good or not)  So I guess the building doesn't have lending problems.  Quite a shocker to both me and my agent.  I'll search a few more lenders, but it sounds like it's not an issue.  

Next up..........how to figure out what is a good loan for a 30 year conventional.  Ugh.  Being a first time buyer stinks.

   
  • November 18 2011
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I echo what Rudi said about current condo fee........ bldrs is still in control of CHOA, and it is common that they keep condo fees low as it is a great selling tool as you expressed. The last time I was involved in an new HOA the developer presented an invoice once owners had control for $70K for expenses they incurred while carrying HOA.  Fortunately they were not successful in collecting  but HOA dues went up max. allowable % annually for the next  3 yrs to make up short fall HOA was experiencing based on developers inadequate budget concerning expense vs income. Low HOA dues may not be realistic and there is likely a reason "common $400 plus HOA for most condos" are real.
  • November 18 2011
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Thanks for the replies everyone.  Here is the condo in question: http://www.sdlookup.com/MLS-110060627-889_Date_St_107_San_Diego_CA_92101

While the lender has yet to give me a good faith quote, he did say rates were around 4%.  So that seems in line with other lenders on FHA approved properties.  As far as looking else where, those in San Diego know there isn't much available in the 92101 area under $180k.  Add in the common $400 plus HOA fees for most condos, and my choices go down to nill.  This unit has $289 HOA's.

Still debating on what to do here.  Thanks for all the input!  
  • November 18 2011
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We have lenders that may lend on this property. You have an excellent credit score and down payment, surely in San Diego there are other condos that you can fall in love with. You just haven't seen them yet.

In a situation like this their HOA Dues could rise dramatically. If that occurs, can you afford it? If you can't, how easy will it be for you to sell and by doing so, how much money will you lose?

When looking for a condo it's best that it qualifies for traditional financing: http://www.freddiemac.com ... condo.pdf

Happy funding, Rudi
  • November 18 2011
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There are three portfolio lenders I know of who will lend on a condo with these types of conditions.  Actually two.  $170k is below the minimum for one of them.  

With the first one, your rate will be about 1% above conventional and the fees will be about 1% higher than conventional.  With the second one, rates are as good, if not better than any conventional lender and the fees are standard.  They recently filled their quota on their 30-year fixed product so that is no longer available at the moment, but other fixed and ARM products are.  

Reading through your post again, I see that one of the main issues is that the builder still owns more than 10% of the units.  I know of another wholesale lender who does not consider the builder "an entity who owns 10% or more of the units" if the builder is not renting out any of the units.  

So it would appear as is you do have some viable options and without high rates or exorbitant fees.  You just need to find the right banker of broker to work with.  
  • November 18 2011
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Your first question is an "eye opener". There is a reason other lenders will not lend on the condo, and it has to do with not meeting guidelines that make loans available for Fannie Mae or Freddie Mac financing. There are very limited non warrantable  condo lenders, which could impair selling unit in the future. If those lenders disappear selling other than to all cash buyer could be only option.
 My input would be to find a condo that is eligible for FNMA/FHLMC financing or better yet a townhouse. There is likely a decent selection of housing for sale in your area, but high risk should not be your housing choice.
PS You are every seller's dream customer......
  • November 18 2011
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