I just finished a lovely dinner with my old friend Lana (old as in known her for a long time, not old as in sheâ€™s geriatric), and she asked a question over her rosemary herbed rack of lamb that I thought Iâ€™d share with you. And no, Iâ€™m not sharing the lamb or the pinot noir that came with it- just her questionâ€¦
Lana is trying to refinance her condo, and wanted to know what I thought she should do.
She lives in an historicÂ building with only three units, converted from an old estate into condos in 2000, all sold with residents living in them. Sheâ€™s owned her unit since 2006, and just wants to refi to get a lower interest rate. Sheâ€™s not looking to take cash out, and has applied at her local credit union for an FHA loan. Because of FHAâ€™s recent rule changes about what they will and wonâ€™t lend on, getting an FHAÂ loan on her unit has become a bit more challenging. The loan officer at her credit union suggested that they apply for a waiver from FHA due to the fact that her condo had been fully occupied for years, she has excellent credit, and sheâ€™s not looking to pull cash out. That was in September. Sheâ€™s still waiting.
She wanted to know if I thought she should look elsewhere, as in a non-FHA loan. Â
The short answer is no. If she goes to a non-FHA loan program, sheâ€™ll be required to have significant equity in the property the same wayÂ the buyer of a new property would be required to these days- in most cases, thatâ€™s around 20%. Even the though she has excellent credit and stable income, the value of her condo has remained about what she paid for it three years ago, if not dipped a little. She got 100% financing when she bought it, so her equity position isnâ€™t very strong.
Plus, the interest rate sheâ€™d get from a non-FHA loan would probably be a bit higher than an FHA loan, negating much of the benefit of the refi in the first place.
My suggestion, though it wasnâ€™t the brilliant brainstorm sheâ€™d hoped for, was to continue pressuring the credit union to get an answer from FHA on her waiver and approval. The way FHA has changed their rules lately, first making them more strict about six weeks ago, then relaxing them somewhat a week later, tells me that heaven only knows what their regulations will be three to six months from now. With a little patience, she may well get her FHA refi. But it might take awhile, as the lending landscape is still rocky and unpredictable. But unfortunately, she doesnâ€™t have a lot of options in reaching her goal other than to wait and be persistent.
Ooohâ€¦ here comes dessert! I think thereâ€™s chocolate involvedâ€¦ gotta run!
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