If you’re thinking about buying a Santa Cruz condo, it’s imperative that you know what you’re getting into, and how the past year has changed things. The rules and regulations for condominium mortgages have changed a lot in 2009…
In April, the two government-run mortgage companies, Fannie Mae and Freddie Mac, tightened their guidelines for those looking to own a Santa Cruz condo or any multi-family home. The restrictions make it harder for potential buyers to get financed through Fannie Mae and Freddie Mac, which makes a mortgage more expensive.
The April policy requires that the condominium association and operations be evaluated, as well as your credit qualifications. The new requirements touch on subjects such as:
• The association’s insurance
• Financial statements
• Status of dues receivable from those living in the condo
• Who owns what units
• How many units are empty
If the condominium you’re looking at doesn’t come back with a good report, you may have to go to a private mortgage insurer. Unfortunately, private insurers are becoming even pickier; some have quit covering condo mortgages all together. To be able to get a loan, even with good credit, you may end up paying as much as 40% down to get mortgage payments you can afford.
Even if the condo is approved, however, you’ll still need to come up with 25% or try government financing. Fannie Mae and Freddie Mac say it doesn’t matter what your credit score is. If you can’t pay 25% or more in the down payment, you’ll end up with a three-quarter point add-on penalty - $750 for every $100,000 borrowed. What’s the penalty for? Not buying a “traditional,” single-family home.
What’s the moral of the story? If you want to buy a Santa Cruz condo, spend more time researching than you normally might. Look for those that have at least a 50% occupancy rate. Find out if the occupants pay their dues, and if one person owns more than 10% (a big “no deal” for the two mortgage companies). Good condos are out there and available, but the rules make buying a hard game to play.
If you’re looking for a great condo that qualifies for Fannie Mae/Freddie Mac financing, I can help. Call me at 831.662.6522 or email me at lauren@laurenspencer.com for more information.
Links:
Three-quarter point add-on penalty
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