Home Buying in 60614>Question Details

Kalopedi, Home Buyer in 60614

looking to purchase a new condo in burr ridge and the building has 50 units only 10 sold and no fha financing what are your thoughts? thank you!!!!

Asked by Kalopedi, 60614 Thu Jan 20, 2011

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Dear Kalopedi,

Before I'd offer you any "answers" I have a few "questions" about your question before I just make assumptions.

If you must do an FHA loan, then this doesn't sound like the building for you. If you're not sure about non-FHA loan options available to you, then feel free to email me and I can send you a list of lenders that I'd suggest you call to investigate your lending options.

If you're committed to Burr Ridge, must you buy condo or are you also considering other property types (single family homes, townhomes, etcetera)? If you're open to other property types, then you might want to begin investigating short sales or foreclosures of different property types that might be priced very similarly to condominiums in the same area. And these other property types might not have some of the same lending and/or ownership obstacles as the condominium complex you're describing.

If you'd like to discuss your options generally or get a referral to an agent who specializes in that particular geographic area, then feel free to contact me at any time.

Sincerely,

Christopher Thomas
Broker Associate, Keller Williams Realty Chicago Consulting Group
716 E. 47th St. Chicago, IL 60653
(773) 418-0640 (cell) (312) 577-0985 (fax)
cthomas@kw.com
http://www.myagentchris.com
0 votes Thank Flag Link Fri Jan 21, 2011
Kalopedi,

I like the way you phrased your question because it opens up a nice dialogue. As a lender, I can tell you that condo financing has gotten increasingly stringent over the last five years for exactly the reasons Philip gives. With prices dropping, people who have recently bought (some of them with no money down, which was available until 2007 for pretty much everybody) are walking away from their granite countertops and stainless steel appliances, and not looking back. This hurts everyone else in the fledgling association.

So lenders (as well as Mortgage Insurance companies) have been tightening restrictions on condo financing, trying to weed out as many of the buildings that are in trouble while still providing finacing to well-qualified buyers.

We need to qualify not only the borrower, but the building as well, and we are frequently underwriting to not only FHA , FNMA or FHLMC guidelines, but also to the MI Company (for conforming loans) as well as any credit overlays the end investor may have. (We operate as a Mortgage Bank, so we sell to all of the major players.)

With all these changes, it's easy for this information to not get out to the people that it should, because NOT ALL THE NEWS IS BAD. You, Matt and Linda need to know that for many first time homebuyers, there are conforming loans available with only 5% down, and many different PMI plans are available, including some with NO MONTHLY MI PAYMENTS AT ALL.

This "5% Solution" is available to those with credit scores over 680 and 5% of their own funds to put down. Closing costs can still be paid for by the seller, so the difference between conforming and FHA is only 1.5%! And most FHA lenders require a 640 score, so the difference in FICO scores is neglible as well.

So, if any of you (Kalopedi, Matt Laricy or Linda Dressler) would like to know more about these programs, please feel free to give me a call or shoot me an email. If you (Kalopedi) would like to start the process, you can also go to my website, and click on ... well ... "start the process" for a Free Confidential, Online application.

Talk to you soon,
Matt Bukovy
Senior Mortgage Consultant
Wintrust Mortgage
773-654-2498
mbukovy@wintrustmortgage.com.
Web Reference: http://www.mattbukovy.com
0 votes Thank Flag Link Fri Jan 21, 2011
With only 20 percent of the units sold, the developer is still in control of the association (needs to be at 75%sold )

If that developer goes bankrupt or loses the properties to foreclosure, this could have a devastating effect on the association (and their coffers) as well as potentially driving down the value of sold units.

Frankly I would be wary of buying into a building with so few sold units unless I had strong proof of the liquidity of the builder and assurance that the unsold units won't be either heavily discounted or returned to the bank. The risk is just too great.
0 votes Thank Flag Link Fri Jan 21, 2011
Kalopedi -

You need to find out everything about condos these days to ensure you can get a loan. If you can't do FHA, you usually need a good credit score over 700-720 and a good percentage down - 20% to do this deal. Plus, you need to see the condition of the association. I would look into a lender who knows condos first before attempting to get the condo association to do FHA. It is an option and doesn't take forever, but could take a couple months. Also depends on how much rental in the building, etc.

If you need help on this and the name of a condo lender speciality, give me at call at 888-788-9544. Condos can be tricky, so you can know what you get into before you jump. But they can be a great investment for home ownership, rental, etc. at this time.
0 votes Thank Flag Link Fri Jan 21, 2011
You won't be able to get an FHA loan on these units. You will have to go conventional, and have to put down a significant down payment usually. I do know some lenders that are doing loans on new construction though if your looking for help.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
Mlaricy@americorpre.com
708-250-2696
0 votes Thank Flag Link Thu Jan 20, 2011
Kalopedi:

If you are going FHA lending, that poses a problem for you. I have a lender who will work with the condominium association to help them obtain FHA Approved status if it is possible... feel free to contact me directly should you want more information.

Thank you and Good Luck!
Linda Dressler, Realtor®
SRES, SFR, ADPR
0 votes Thank Flag Link Thu Jan 20, 2011
The potential issue for all new construction and conversion projects since 2006 is that the market has tanked. Most of those projects cannot sell out so the developer is either renting them out until things change or more frequently, dropping prices frequently just to get out. In such an unstable situation you really do not know what the values are and there is an increased chance that there will be some short sales/foreclosures from folks who bought early at higher prices. If so, those eventual prices will be used to judge all the others....like yours some day perhaps.
In most of these projects the potential risks are usually greater than the potential gains, unless you pick up one of the short sales/foreclosures. Be careful.
0 votes Thank Flag Link Thu Jan 20, 2011
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