Here is a term to get familiar with:

Non Warrantable Condo

The condo project does not fit the three Fannie Mae, Freddie Mac or FHA class guidelines. Banks typically do not like to lend on condominiums in non warrantable condo projects because they cannot be insured and cannot be sold off to an investor. The only lenders who will lend on a non warrantable condo project is a portfolio lender.

Non warrantable condo portfolio lenders lend their own money and hold the loan for servicing in their “portfolio” of loans.  Non-warrantable condo portfolio lenders tend to lend on riskier real estate transactions and give higher rates due to the risk. Yes…this means a non warrantable condo typically have higher rates.

How do I find one of these banks that offers portfolio lending?

Mortgage Interest rates have again tested 20 year lows. So the for those trying to time market make sure you are already approved by your bank or lending institution and have your finger on the trigger. While for years and years most economists or analysts have predicted that at some point rates will have to go up. While that probably is correct  is up going from 4.25%-4.75% or does that mean to 5.25%? Your guess is as good as mine. I believe most mortgage holders would benefit from today low rates. The important thing to do is work on getting yourself qualified as soon as possible so you are prepared. With rates this low the process starts to sloooooowwwww down. As a borrower you have to have the 3C's in order(Good Credit, Capacity to repay documented with tax returns, Collateral or enough equity in your property) You can also start the process then watch the rates with your trusted lender. In today's lending environment the "haggle" over interest rates isn't an impressive conversation with your lender. Lenders no longer earn their income based on the interest rate you decide you want to "lock in" at. The rate will determine whether you are paying closing costs or the bank is covering the costs for you. (see my earlier article on closing costs)

08/04/2011

2 Questions: Does the "No Cost" loan really mean "No Cost"? Why would I want to pay points?

Answer: While a "No Cost" loan certainly can devoid you of the traditional costs (Closing costs)of obtaining financing commonly including: Title/Escrow Fees, Appraisal Fees, Point(s) or Discount Fee(s), Processing Fees & Lender fees. This doesn't mean it won't cost you. 

Take for example a 30 year fixed mortgage at 4.875% on a $250,000 loan amount. This loan has NO Closing Costs   The interest you pay over the life of the loan is $225,928

Now for the same loan at a lower rate of 4.625% you would have $4350 in closing cost. However you would only have $212,398 ($13,530) in total interest and the lower rate would save you $38 per month ($13,680 in life payment savings). 

While the savings over 30 years are noteworthy before you go spend your hard earned money in the bank lets consider some variables. 

• How long have you been in the home /How long you plan to be in the home?
• Are you going to refinance again in the future? Adjustable Mortgages, Balloons, Construction Loans etc may cause you to refinance in the future. Historically the average life of a loan is 7 years. Lower rates may stretch that figure out.
• Do you have the savings or equity necessary to pay the closing costs? Does it cause a hardship by using those funds?
• Can you invest those savings to further increase your savings? 
• What rate of return do those funds (used for closing costs)currently create for you?

This is just one area a seasoned mortgage professional that is looking after what's best for you will bring to light. 

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