Nationwide Home Mortgage Loan Company

Many deals have been killed by a loan officer over looking this simple little check box on the 1003 (Standardized Uniform Residential Application). The fact is, we often forget that lenders are holding our home as collateral, and more times than not own more of the house than the borrowers do. Lately, lenders have become more and more skeptical about the type of property they choose to hold as collateral for these loans.

The way you get your best deal on any mortgage from any lender is to get an Agency loan. These agencies (Fannie Mae, Freddie Mac, FHA, VA, Ginnie Mae, USDA) insure the lender against you going “belly up” on the loan. They are often refered to as a “conventional mortgage”. We call them conforming loans. When the borrower and property must “conform” to their guidelines and you will get an insured loan and the best rates. Here are a few of the Agency guidelines for property types.

• Condominiums - All condo’s must meet strict guidelines for residency and warrantable. If you live in a condo check with your association to see if you are a warrantable unit. If you are not, expect to pay more for your loan, or in some cases (condotel) not be able to do it with a conventional loan at all. Some types of condo’s will represent a higher risk factor and may affect your approval or rates. Usually condos over 5 stories or complexes that primarily consist of rentals. Condotels are not agency friendly.

• Rural Properties - Rural properties per-say do not frighten underwriters and lenders. However, there are several Agency guidelines that throw a wrench in the machine when trying to do rural properties. Most conforming guidelines allow for one house per five acres. This isn’t written in stone but what I say next is. When a home’s value is lower than the property it sits on, the loan is considered agricultural.
  Conforming lenders do not do agricultural loans. Also, If you raise livestock, have kennels, or derive income from the property it will disqualify you. In addition, most conforming underwriters have very strict guidelines on appraisals and how far away from the subject property they can travel to get comparable sales. Rural properties almost always push this boundary. Rural properties do not usually affect your rate when considering a conforming loan, however it could exclude you all together from one.

• Houses Under Construction - Started adding on that new room and ran out of money? Guess what, this is very bad. Most lenders, and I mean 97% will not touch this loan. You are now looking for a construction loan. Lenders will not take partially built houses for collateral. You are better off working with the local bank or finance company to get the funds to finish the project. This type of property is rerely considered by conforming lenders, your best bet is the county or local bank that holds their loans.

• Houses Listed For Sale - Thinking of refinancing your home and recently had it for sale? Every appraisal that is done tells the lender if it has been on the market in the last 6 months, and if it has some lenders will shy away from the loan. Lenders make their money from interest and do not wish do do short term loans. You are looking for a bridge loan, different lender and whole different interest rate. There are exceptions to this rule, but it is at underwriter discretion.

• Storm Damaged Homes - Ask anyone from New Orleans or Florida about this one. If the appraisal mentions storm, flood or any other kind of damage, you’re done unless you repair it. Sometimes lenders will allow you to close in escrow, meaning fix the damage and they will close the deal. However the lenders that do this are far and few between.

• Mobile Homes - If it had wheels and a VIN number at any time in history 97% of all lenders will avoid you like the plague. Please do not build a home around a trailer, yes I have seen this done, it’s still a trailer. FHA will still give good deals on mobile homes, their list of stipulations is as long as your arm, but it is possible.

• Houses in Flood Zones - FEMA has a map of the United States that supposedly outlines which areas are mandated to have flood insurance. I have danced with these rocket scientists before about a home that was clearly not in a flood zone. Guess what, FEMA won. If your home is in a flood zone you can expect a long fight and some hefty flood insurance premiums.

Tags: Mortgage Basics, Mortgage Tips

This entry was posted on: Saturday, June 7th, 2008
Other Categories: Mortgage Basics
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