Loan Limits Increase in 2019!

Bob Vaughan

After not increasing the maximum conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac for 10 years, the Federal Housing Finance Agency has now increased the conforming loan limit for the third year in a row. On November 27th, the FHFA announced that it is increasing the conforming loan limit for Fannie and Freddie mortgages in nearly every part of the U.S. According the FHFA, the conforming loan limits will rise from 2018’s level of $453,100 to $484,350 for 2019. That’s an increase of 6.9%! As stated above, this marks the third straight year that the FHFA has increased the conforming loan limits after not increasing them for a period of 10 years (from 2006 to 2016). Back in 2016, the conforming loan limits were increased from $417,000 to $424,100. Then, in 2018, conforming mortgage loan limits were raised from $424,100 to $453,100. And now, the FHFA is doing it again, increasing the loan limit from $453,100 to $484,350 for 2019. The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. But, according to the FHFA, home prices are still on the rise. The FHFA’s third quarter 2018 House Price Index report, showed that home prices rose 6.9%, on average, between the third quarters of 2017 and 2018. Therefore, the maximum conforming loan limit in 2019 will increase by the same percentage to $484,350. The conforming mortgage loan limit in Lee County, Collier County and Charlotte county will be $484,350.

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FHA Approved Condos in Sarasota County as of 11/6/2017

Bob Vaughan

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Below is a list of condos in Sarasota County that are currently approved for mortgage financing with an FHA mortgage loan. Condominium mortgage financing is different from single family home mortgage financing in the fact that the condominium associations must be approved by the lender and also by FHA/VA if doing an FHA or VA mortgage loan. If you have any questions about condominium financing with a mortgage loan, please contact us today at 239-307-LEND (5363).

Condo
Name		 Address Composition
of Project		 Expiration
Date
BAY STREET VILLAGE NAVIGATION CIRCLE OSPREY, FL 34229 Project is under   construction. Total number of units will be 209 units.
Phase 3, Building 3		 07/20/2018
BUCKINGHAM MEADOWS ST ANDREWS MONARCH DRIVE
VENICE, FL 34293		 28 units/4 Phases
***FULL PROJECT NAME: Buckingham Meadows of St. Andrews East at the   Plantation		 06/23/2018
CENTER GATE VILLAGE CONDO #7 CENTER POINT LANE
SARASOTA, FL 34233		 12 buildings   (duplexes) – Each building contains 2 units 12/29/2018
FAIRWAYS OF CAPRI CAPRI ISLES
VENICE, FL 34292		 4 units single story   & 8 units 2 story building 11/23/2017
(nearing expiration)
LIDO SURF & SAND BEN FRANKLIN DR
SARASOTA, FL 34236		 High-rise   Condominium Building 12/31/2017
PINESTONE AT PALMER RANCH 4255 PLAYERS PLACE
SARASOTA, FL 34238		 310 units 08/30/2018
STONEHAVEN CONDOMINIUM MOONSTONE DRIVE
SARASOTA, FL 34233		 Townhome style units   244 05/03/2018
VERANDA VII AT HERITAGE OAKS HYLAND HILLS AVENUE
SARASOTA, FL 34241		 2 Floors 12 to 16   units per building 03/01/2018

 

If you’d like to search for condos which are approved for FHA mortgage financing in your area, you can do so at https://entp.hud.gov/idapp/html/condlook.cfm.

Fannie Mae Condo Financing and Reserves

Bob Vaughan
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Condos which are being financed   by Fannie Mae are subject to not only borrower qualification, but   also condominium association approval by the lender. The lender must   determine the association’s soundness by performing a condominium review of   the project.  There are two types of condo reviews; a full condo review and   a limited condo   review. The determination on when one review is used over the   other rests primarily on occupancy type and down payment. If the buyer is   purchasing a primary residence and is putting less than 25% down, or the   buyer is purchasing a second home and is putting less than 30% down, or the   buyer is purchasing an investment property, the purchase is subject to a full   condominium review. On the flip side, if the buyer is purchasing a primary  residence with at least 25% down or a second home with at least 30% down, the   purchase will be subject to a limited condo review. One of the biggest   differences in the two types of reviews is the lender’s responsibility to   analyze the Association’s budget and to see if it is setting aside sufficient   reserves for future replacements – in a full condo review, this is required,   in a limited condo review, this is not required.

When determining if reserves are sufficient, the lender must review the HOA   projected budget to determine that it:

  • is adequate (i.e., it        includes allocations for line items pertinent to the type of condo        project), and
  • provides for the funding of        replacement reserves for capital expenditures and deferred maintenance        that is at least 10% of the budget.

How is the 10%   reserve allocation in the budget calculated?
To determine whether the association has a minimum annual budgeted   replacement reserve allocation of 10%, divide the annual budgeted replacement   reserve allocation by the association’s annual budgeted assessment income

Lenders are permitted to use a reserve study if the association does not   budget replacement reserves of 10%, but must meet the following   criteria:

  • The lender obtains a copy of        an acceptable reserve study and retains the study and the lender’s        analysis of the study in the project approval file;
  • The study demonstrates that        the project has adequate funded reserves that provide financial        protection for the project equivalent to Fannie Mae’s standard reserve        requirements;
  • The study demonstrates that        the project’s funded reserves meet or exceed the recommendation made in        the study; and
  • The study meets Fannie Mae’s        requirements for replacement reserve studies listed in the Fannie Mae        Selling Guide.

Fannie Mae Joins Freddie Mac in allowing Appraisal Free Purchase Mortgages

Bob Vaughan

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Freddie Mac announced two weeks ago that beginning September 1, 2017 they will allow certain purchase mortgages to not require an appraisal to complete the transaction. One week later, Fannie Mae followed suit in allowing appraisal free purchase mortgages on certain transactions beginning immediately. Transactions are limited to loans that have LTV ratios (loan to value) of 80% or less and most transactions with a down payment of 20% or more are still expected to require an appraisal. Transactions that do not require an appraisal are given a PIW (Property Inspection Waiver) which are granted by valuing the property through algorithms and databases of existing data compiled by millions of existing appraisals. The percentage of homes that will be granted a PIW is still up in the air to the general lending community and more information will become available over the upcoming months.

Fannie Mae Announces Big Change on Student Debt

Bob Vaughan

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With outstanding balances of over $1.4 trillion, student debt is on the rise and is the second leading form of debt in the United States behind mortgage debt. From a balance of around $480 billion in 2006, student debt has almost tripled over the last 10 years. So how does this affect someone trying to finance a home purchase?

Student loans are debt and need to be considered in a borrower’s debt to income ratio when applying for a mortgage loan. Up until late April this year, Fannie Mae required that on a conventional mortgage loan the borrower’s monthly payment needed to be calculated to reflect at least 1% of the outstanding balance of the debt, regardless of what payment was reporting on a credit report. Now, for conventional mortgage loans, they are allowing payments which are reporting on education loans to be used for debt to income purposes even if the monthly payment is less than 1% of the outstanding balance.

Imagine someone that is just starting out in the medical industry that has $200,000 of student debt and the credit report is reporting a $1,000 monthly payment. The old guidelines would require the monthly payment to be calculated at $2,000 even though the bureaus were reporting $1,000. Now, for conventional loans, lenders can use the lower payment which is reporting on a borrower’s credit report. In the above example, that would reduce the borrower’s monthly debt obligations by $1,000, potentially increasing that borrower’s price range by over $150,000! This is a substantial change for the real estate industry as it will lead to increased affordability for borrowers with high student loan balances and low monthly payments.