Archive for July, 2010

Interested in a Condominium? Get a FHA-Insured Loan

Mortgage Insurance for Condominium Units (Section 234(c)) program assists potential homeowners in purchasing a home in a condominium development. The prospective condominium must be the potential homeowner’s primary residence.

The intent of this federal program managed under the U.S. Department of Housing and Urban Development (HUD) is to insure the loan of a borrower who buys a unit in a condominium property. HUD does not directly provide loans to borrowers. Instead, HUD insures loans through FHA-approved lenders. Some of those who take advantage of the program are low- to moderate-income renters who want to buy their unit in order to avoid displacement when their apartment building is converted into condominiums.

Some aspects of the program are as follows:

* Program insures the loan up to 30 years.
* Condominium development must be separated into a minimum of four dwelling units – can be a walk-up, a rowhouse, semi-detached or an elevator structure.
* Loan is made by a certified HUD lender.
* To be eligible, you must prove creditworthiness and meet FHA underwriting criteria.
* Down payment may be as low as 3 percent or less – FHA insurance enables homeowners to finance around 97 percent of the home’s cost through the home loan.
* Some closing fees may be included in the loan, reducing up-front cost.
* FHA limits certain fees charged by lenders – e.g., loan origination fees.
* FHA limits the amount of the home loan based on the locale of the condominium and number of units being bought.

Some restrictions do apply to the program. FHA will not insure loans under this program for rental units converted to ownership except as follows:

* Units were converted over a year prior to loan application.
* Potential borrower or co-borrower was a tenant of one of the converted units.
* Property conversion is sponsored by a tenant’s group that represents the bulk of households in the development – 80 percent of FHA-insured home loans must be for owner-occupants.

In order to get started, you need to find a FHA-approved lender. You may do so by contacting lenders and asking them if they are FHA-approved or by conducting a search on the HUD website. Either way, you’ll want to shop around for a reputable lender with a good interest rate and low closing fees.

Compare rates and fees, and use the following as a checklist to compare lenders:

* How much is the lender charging for the interest rate and origination fees?
* Is the lender approved by FHA for your local area?
* Do you know the lender’s reputation?

Ask plenty of questions and keep the following in mind:

* Interest rate is not regulated and points are not set by the FHA.
* Before signing any agreement, understand that you are responsible for negotiating with your lender regarding the terms set for the loan, to include routine and reasonable closing costs required to close on the loan.

Property developers who intend to finance the construction or renovation of properties they intend to sell as units under this program may also obtain FHA-insured mortgages.

For more information, visit the HUD website or contact your local lender.

Ki created a website to help buyers interested in Austin real estate. This is a free service for buyers interested in homes in the Austin MLS. He has lived in Austin, Texas for over ten years. He also has a blog for people to keep up with the Austin Texas real estate market.

After Hitting Record Lows Mortgage Rates Fall Again

The 30 year rate dropped this week from 4.69 to 4.58. This is quite a large drop for a week. What makes it even more interesting is that 4.69 from last week was already an all time historic low. We are moving into territory for mortgage rates I would have never thought possible.

While the 30 year rate is the mortgage product that is the most widely used some of the other mortgage products made records as well. The three other mortgage products all hit all time lows last week. Two of the other three mortgage products fell further this week. The 15 year dropped from 4.13 to 4.04. The 5 year arm dropped from 3.84 to 3.79 and the 1 year arm rose from 3.77 to 3.80. Below are rates from the weeks from Jun 03, 2010 to Jul 01, 2010

Jul 01, 2010
30-fixed 4.58 15-fixed 4.04 5 ARM 3.79 1 ARM 3.80

Jun 24, 2010
30-fixed 4.69 15-fixed 4.13 5 ARM 3.84 1 ARM 3.77

Jun 17, 2010
30-fixed 4.75 15-fixed 4.20 5 ARM 3.89 1 ARM 3.82

Jun 10, 2010
30-fixed 4.72 15-fixed 4.17 5 ARM 3.92 1 ARM 3.91

Jun 03, 2010
30-fixed 4.79 15-fixed 4.20 5 ARM 3.94 1 ARM 3.95

Dec 17, 2009
30-fixed 4.94 15-fixed 4.38 5 ARM 4.37 1 ARM 4.34

So now that we have seen rates lets look at actual mortgage payments. We took today’s rates and used a mortgage calculator to translate them into a payment on a 200k loan. We also did the same thing with rates from June, 17 2010 (2 weeks ago) and rates from December, 17 2009 (6 months ago)

Jul 01
30-year $1022.89
15-year $1483.38
5-year ARM $930.77
1-year ARM $931.91

Jun 17
30-year $1043.29
15-year $1499.5
5-year ARM $942.19
1-year ARM $934.19

Dec 17
30-year $1066.32
15-year $1517.74
5-year ARM $997.98
1-year ARM $994.44

Compared to June 17th mortgage payments are 1.95 less today for a drop of $20.40 a month on a 200k loan. Compared to December 17th, 2009 mortgage payments are 4.07 percent less for a drop of $43.43 a month.

So what is going to happen moving forward? We are pretty much in uncharted territory. With rates now significantly below what we have seen before it will be interesting if they continue to fall. In the short term it’s hard to know where rates are going to go. I don’t see rates falling below 4.3. Once the economy improves rates will move up and perhaps drastically so. For awhile it seemed the economic recovery was rather strong. If we see a double dip recession we could see rates stay low for awhile.

Ki developed a website to serve Austin Texas real estate investors. It also has several mortgage rate widgets for people to keep up with the market along with a mortgage calculator widget.