What are you actually buying, a townhome or a condo?

What are you buying, a condo or a town house?

Looks like a townhome, acts like a townhome – but its a condo, and that makes a big difference in mortgage financing!

People, including many Real Estate Agents, mistakenly assume a property legally platted and developed as a condominium is a town house. In the mortgage financing industry, there is a difference in both interest rates, and the time and ability to get a loan for a condo versus a town house.

Minnesota Mortgage Broker - Best Interest rates - Condo financingWhen you buy a home, there are two major aspects:

  1. The lender “credit qualifies” the buyer
  2. The lender “qualifies” the home with an appraisal.

What many people miss is that if you are buying any property with an association (townhome or condo), the lender also has to qualify the association.

A townhome, often referred to in the industry as a PUD (planned unit development) is much easier to get approved, and the interest rate the buyer receives is usually the same as a single family home.

A condo on the other hand is much different. The interest rate depends on the down payment, number of stories, and a few other factors. It is usually 1/8th (.125%) to 1/4 (.25%) HIGHER than a single family home. Furthermore, the process to approve a condo association is much more complex, takes significantly longer, and usually requires the buyer to pay $200 – $300 in additional fees to get the documents from the association the lender needs to approve the loan.

Should this scare you away from buying a condo?  Of course not.

Financing rates and options depend on your knowing … Condo or Townhouse?  Does your mortgage lender know the difference?  Does your agent?  Do they take the time and make the effort to find out?  If not, you’re working with the wrong person …

You can save a lot of headache and hassle down the line if you know the rules, and if you are working with a Realtor and
Mortgage Loan Officer who understands the differences, and can properly guide you along your way to a
successful home purchase.


Are No Doc loans still available?

“NO DOC” loans had been around for years, and served a niche market for the self-employed, commission, and tipped income home owners. Because of their additional risk, they came with higher interest rates, bigger down payments, and generally were only available to self-employed people with a minimum of 2-years provable self-employment history and trouble documenting their true income.

As the home loan markets changed through the early 2000’s, these loans grew in popularity, especially once Wall Street introduced new no doc, stated income, stated assets, no job, and other ridiculous variations with underwriting guidelines so silly almost anyone could qualify for a home loan.

These new variations turned a small niche program into what became commonly known as liar loans. This was because because both customers and Loan Officers were easily allowed to misrepresent the borrowers true circumstances.  They were highly abused by consumers, and bad loan officers everywhere, as people realized they could easily get a loan they either should not be getting at all, or more commonly, to get a bigger loan than they normally would have received.

These liar loans were one of the first casualties of the mortgage market meltdown as many of these customers were some of the very first people to end up in foreclosure. Lenders everywhere quickly pulled them from their product lines, and many states now have laws on the books banning them completely.

Unfortunately, the self-employed, commissions, and tipped income people who truly need and benefited from stated income, no documentation (NINA, NIVA, NISA, SISA) type loans are now without loan options. The old saying, one bad apple spoils the whole bunch… In this case, it was a whole bunch of bad apples that spoiled it for the one who really needs it.

If you are looking for a respectable No Documentation loan, you are pretty much out of luck, unless you are:

  1. In a state that still allows them
  2. Have excellent credit
  3. Are in need of under 65% loan-to-value
  4. Are willing to pay huge up-front costs and very high interest rates to “hard money lenders

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Looking for a “no doc” loan in MN and WI?, Can you still get financing? Maybe, but not without fully documenting your ability to repay your loan.

But, don’t give up just yet. Let a licensed professional loan officer review a full application.