Financing in 10591>Question Details

Boyet615, Home Buyer in New York, NY

We've purchase a condo in a development that is less than 51% sold, hence we had to deal with the sponsor's lender sice we cannot obtain a

Asked by Boyet615, New York, NY Wed Dec 9, 2009

loan from banks. We put a down payment of 20% on a 750K property of which 25K is being contributed by the seller for the closing costs. Submitted all necessary documents on September 22 to our broker. Property was appraised @ 750K on 10/23. Rate was locked @ 5.50% on 10/28. Mortgage contingency was extended again. I was informed that the mortgage people were so understaffed that the files finally went to underwriting on 11/28. I was told 12/3 to submit all bank documents which we did and promised commitment as soon as it was received so I faxed them. Still waiting... The broker doesn't give us any call or even reassurance to this date. My partner and I both have 750 on our FICO and a combined income of 400K. What could be causing all the delays?

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Boyet615,

Unfortuantely, this problem may be bigger than bad customer service. It even appears to be the case since you mention it's under 51% sold.

If your lender is using a conventional/conforming lender or FHA, the project likely is not warranted and cannot obtain financing for either types of loans. This has nothing to do with your credit or income. You could have an 850 credit score, 50% down and make $400k an hour, neither Fannie Mae, Freddie Mac, FHA finance that condo.

There's two solutions for units under 51% sold (assuming it's new). One, as of December 7th, FHA now only requires 30% of new construction condos to be sold and owner-occupied to obtain a FHA warranty. This is one of many new guidelines put in place to help condos obtain a FHA warranty since FHA Spot Checks are going away in February 2010 (extended deadline from October 1st, November 2nd and December 7th. See a trend?).

The other, if the project has a preferred lender who specializes in condo financing, they collect pre-phase contracts and close multiple transactions simultaneously EVEN IF THE PROJECT IS NOT WARRANTED. They do this because they know they can apply for the warranty after the people move in. Only lenders and loan officers highly familiar with the process have the ability to do this and are willing to take the risk of funding non-warranted condos.

Lastly, and hopefully this is your scenario, the broker is planning on using a non-conforming lender who does not need FHA, Fannie Mae or Freddie Mac financing to fund. There are only a handful of lenders who do this, so if this is the case, they are likely very slow and backed up. The speed of the lender has nothing to do with the broker. It is the broker's job to keep you in the loop and communicate with you, but it may not be their fault it's taking this long. Only their fault that you have to ask questions on Trulia to get an answer.

Here's a link to a blog post I wrote on Zillow.com about FHA Condo Spot check changes. Anybody buying a condo should take into consideration the importance of getting warranties for the project.

http://www.zillow.com/blog/mortgage/2009/07/21/new-fha-guide…

Good luck!
1 vote Thank Flag Link Wed Dec 9, 2009
That is standard practice many lenders are overwhelmed now have conditions cleared and etc. Most closing from an executed contract could take up to 60 - 75 days to close vs. old days of 30 days .

If the propery does not work with lender guidelines of ownership / vs. rentals properties known fact loan most likely be declined. Ratio are usually around 60% / 40%

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
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Lynn911

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0 votes Thank Flag Link Sun Dec 13, 2009
Keane-great job!!! Ditto for your zillow blog.

The good news, as Keane stated, is that you can now apply for an FHA assuming more than 30% of the developement is sold. I doubt that they would mind extending you mortgage contingency if they are less than 50% sold.

You would need a new appraisal if you go FHA, but if they are not going FHA it won't happen. I can't even think of a portfolio lender that would do a jumbo loan on a condo with less than 51% sold and only 20% down.

Feel free to contact me if you have any questions. 908 415 3958.

Good luck!
0 votes Thank Flag Link Wed Dec 9, 2009
If you do close, be sure to push the builder to apply for a FHA warranty immediately. The new guidelines that took affect on December 7th state that a NEW project only needs 30% of the units sold to obtain a FHA warranty. This will help others move in and help retain value of the complex. You'll still need to get to 51% before you can apply for conventional/conforming warranties.
0 votes Thank Flag Link Wed Dec 9, 2009
Do you know that the sponsor's lender is still underwrtiing loans for this complex? You should probably have your attorney check this out. I have heard of new developments where the sponsor's lender has an expiration date (and I'm not saying this is the case here). When that expiration of their agreement to be the lender expires, the sponsor may not be able to get another lender to take over, especially if there is less than 51% sold. Hopefully this is not the case, but it is certainly worth investigating. Is your agent with the sponsor's office or a separate agency? If I were buying at a new complex with less than 51% sold, and a 20% dp, I would be on the phone right now with my attorney and agent trying to find out what is going on. Good luck.

Barbara O'Connell
Licensed Real Estate Salesperson
Margot Bennett, Inc.
914-548-1628
0 votes Thank Flag Link Wed Dec 9, 2009
Have you confirmed the stability of your builder. Many builders across the country are finding themselves in serious financial trouble. Try doing some investigating into this...Hopefully, you will find them to be solid as a rock. Our recommendation is to protect your interests by doing a little detective work.

Good luck
0 votes Thank Flag Link Wed Dec 9, 2009
The lender is most likely busy with re-financing customers.
Bad customer services is a common problem in the mortgage business.
Hang in there...it will happen!
0 votes Thank Flag Link Wed Dec 9, 2009
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