Condos – As anyone who has been “in the market” for a while knows, loans on condominiums have been getting more expensive and harder to get over the last few years. Well, it’s getting worse. Let me explain the what and “guess” the why:
The way it was – The way it was, a condo loan would have additional fees on it equal to .25% of the loan amount. So, a condo loan for $100,000 would have approximately $250 in additional fees.
The way it is now – if a borrower is at over 75% of the value of the property and has a loan term that is longer than 15 years, the fee for being a condo goes from.25% of the loan amount to .75% of the loan amount. That’s a 300% increase. If someone doesn’t want to pay the fee, they are going to end up with approximately a .25% higher rate.
Why are they doing that? A couple of guestimates:
The reason that the expenses and difficulty of getting loans on condos has been happening because a condo’s value is more closely tied to it’s neighbors than the value of a single family home is. If the neighborhood that I live in has 30% of the homes in foreclosure (there are 5 that I can tell right now), that’s going to impact the value of my home, probably quite substantially. But let’s say that I live in a condo project and we’ve got 30% of our condos in foreclosure, that means that not only do I have the impact of my neighbors lower values, but I’ve also got a situation where the homeowner’s association is losing out 30% of the homeowner’s association dues. That means that they aren’t going to have enough to pay all the bills – the insurance, the maintenance, the lawn maintenance etc. That will have a bigger impact on the value of a condo in that project and that’s why condo loans are more expensive.
The fact that these costs are increasing says a couple of things: 1) That the losses on loans on condos are not going down, but are probably actually getting worse. 2) That the secondary mortgage market believes either that the market is going to get worse regarding condos or if it’s going to stabilize, it’s stabilizing at a loss level that’s higher than what the current fee levels can support.
In short, the “market” thinks that the condo market isn’t at the bottom yet…….
Until next time…
Geoffrey Bolen
Your Mortgage Advisor For Life
Primary Residential Mortgage, Inc.
Phone: 301-588-4701 x84
Fax: 301-588-4709
Email: gbolen@primeres.com
P.S. It’s my intentions to continue building lifelong relationships one client at a time and remain your personal mortgage advisor for life. If you know of a friend, family member, or coworker who is looking for financial options, either through purchasing or refinancing a home. Be sure to send me an e-mail, I know someone. Your referrals are the greatest compliment I can receive.
Why have mortgage rates dropped so much? Especially after the FED had removed their stimulus back in the end of March. That’s a very good question. All of the analysts and the media and even some of us in the industry had predicted that interest rates would go up. Instead the opposite had occurred. Here’s what happened. Europe had much concern in the growing amount of debt, the country Greece was facing. So much so that if the country would not meet its obligations, it would have had a devastating effect to the European economy. 
