Most home sales go through without a hitch but there is always a chance that one will hit a snag somewhere along the line. Many of these are minor irritants, some are downright disappointments.
Few of the latter compared to falling head-over-heels for a condo only to learn that the community isn’t HUD-approved so you can’t use your FHA-backed loan for the purchase.
In reality, if you’re working with the right real estate agent, this shouldn’t happen; he or she should be checking the condo complex’s approval status before even showing you the home.
When it does happen, however, it typically leaves the buyer dazed and confused. Let’s take a look at what FHA requires of condo buyers that differ from its single-family home requirements.
The basic FHA requirements
Lenders have a tough job, especially when it comes to buyers using an FHA-backed loan to purchase a condo. Not only must it determine if the borrower is a decent credit risk, but it must also take into account the risk of loaning money for a home that is governed by a homeowner association. And, regardless of your creditworthiness, if the HOA has problems, the lender and/or FHA will deny the loan.
Some HOA problems that FHA frowns upon include:
- A high number of rentals in the community. FHA rules demand that, at a minimum, 50 percent of units must be occupied by the homeowner. In 2016, HUD changed the minimum to 35 percent, under certain circumstances. Learn more about those circumstances at HousingWire.
- The homeowner association fee delinquency rate must be lower than 15 percent of the budget.
- No investor/entity may own more than 50 percent of the units in the community, but only if half of the units in the community are owner occupied. So, if Warren Buffet or some random Saudi Prince decides to snatch up 52 percent of the homes in a condo community, the complex will be denied HUD approval.
- FHA will not guarantee loan repayment on a condo community that is in litigation. Once the litigation is settled (which can take years), the community can be considered for certification. Litigation examples run the gamut from the HOA suing the developer for construction defects to the famous cases of homeowners suing the HOA for the right to fly an American flag and the proper disposal of pet waste.
- The HOA’s cash reserves must be equal to or in excess of one-years’ worth of the association fees. FHA wants to see that the HOA has sufficient reserves to cover expensive repairs or replacements.
This is by no means the entire list of requirements but represents some of those we most frequently come across. They are quite demanding – so much so that in 2013, about 60 percent of U.S. condo complexes seeking certification were denied, according to John McDermott of National Mortgage News.
Sure, it’s tedious, but the FHA process has advantages
Any home purchase requires a certain amount of due diligence. The buyer’s legal duty is to thoroughly inspect the property and the paperwork that goes with it, before going through with the purchase. Typically, the onus for this due diligence is on the buyer, but in the case of an FHA-backed loan for a condo, HUD does a lot of it for you.
Yes, you still need to read and understand every word on every document included in the HOA documents provided to you before you close on the home. While you’re trying to wrap your brain around covenants, conditions, and restrictions, however, FHA will be poring over the financial solvency of the HOA. While they may just find something distasteful in these documents, knowing that they’re scrutinizing the HOA’s budget and other financials should bring you peace of mind.
Becoming HUD-certified isn’t a one-off task, either. The association must reapply every two years.
Finally, owning a home in an HUD-certified community makes it easier to sell down the line.
If you’re toying with the idea of buying a condo with that FHA-backed loan, do yourself a favor and check out HUD’s list of certified communities. Then, avoid looking at those that aren’t on the list. You’ll find the online database, here.
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For the first time since the Hawthorne Plaza mall was completely shuttered in the late 1990s, building plans have been submitted to City Hall calling for new construction to begin there early next year.
The significant step comes after a decade of standstill between city leaders and the mall’s owner over the decrepit site that once housed J.C. Penney, The Broadway, and Montgomery Ward department stores as well as a range of other retailers.
The plans envision a mega mixed-use development with more than 1 million square feet of commercial space that includes a movie theater, gym, restaurants, bowling alley and other entertainment options among large and small retailers. Offices and 600 housing units will be woven into the less trafficked portions of the project.
“As a council we’ve done, in a year, what hasn’t been done in the last 20 years. That’s the bottom-line truth,” Mayor Alex Vargas said. “Because we cut out the B.S. We cut out the petty politics and are just doing the people’s business.”
Three previous rough development plans floated by West Hollywood-based developer Charles Co. were turned down by City Council members who said they didn’t like the designs.
On Nov. 22, the City Council approved, on a 4-0 vote, a deal to provide financial support for the development by diverting some property tax revenue to the project in the future.
The Hawthorne Boulevard-facing mall stretches from 120th Street south past 126th Street. It’s apocalyptic look, with broken down elevators and hollowed-out stores covered in graffiti, has been used as a backdrop for many films and TV shows over the years.
The site’s massive $500 million transformation will begin by relocating Los Angeles County workers housed in temporary offices in the mall since 2001 to an adjacent office building that will be built at 126th Street within a year.
Once the new $25 million office building is finished and workers are moved, the mall will be demolished, City Manager Arnie Shadbehr said. An underground parking garage will be constructed, and the existing three-story parking garage will be retrofitted to allow for two levels of offices above.
“I can see some hope now,” said Shadbehr, who has worked feverishly to hasten the mall’s development this year. “We can break ground as soon as February.”
Shadbehr was appointed interim city manager last year after city officials revealed that former City Manager Michael Goodson lied about a growing budget deficit. With the support of former Mayor Chris Brown, Goodson and other top city leaders secretly spent tens of thousands of dollars on incidentals like meals and travel expenses.
Since taking over City Hall, Shadbehr has focused on closing a roughly $6 million structural budget deficit. He worked closely with City Attorney Russell Miyahira to renegotiate the city’s debt payments to save $2 million in annual fees.
“The renegotiation of our loan obligations, the hotel project across the street and the Hawthorne mall project are going to close the budget gap and, eventually, in a few years we’ll have a surplus,” Vargas said. “That’s our three-point economic recovery plan.”
Councilwoman Olivia Valentine praised Shadbehr for pursuing economic solvency so doggedly.
“If it weren’t for him, we would never have had the mall at this stage now,” Valentine said. “Arnie and his staff have pushed this thing and pushed it so that we really do owe him a debt of gratitude.”
With home prices in the Westside already very high, it seems counter-intuitive to purchase a property there. Indeed, some real estate writers in the media are predicting another real estate bubble is about ready to burst.
They are wrong – very wrong.
The Westside is in the midst of an explosive economic trajectory that is unprecedented but solid. Well-established social media, technology and other companies that originated in Seattle and California’s Silicon Valley have now established roots in Los Angeles that are very deep. Indeed, the Westside has been re-branded by locals as “Silicon Beach.” Councilman Mike Bonin has said about the community of Playa Vista he serves, where many of these companies are operating, that it is “. . . the tech and innovation capital of Los Angeles.”
Here are some of the astounding numbers that underscore the seismic shift in business for this area:
Google already leases 100,000 square feet in three buildings in Venice. But it has since purchased 12 acres for $120 million in Playa Vista that is zoned for up to 900,000 square feet of commercial space and it is expected to lease the old Hughes Hangar that is yet another 319,000 square feet. In all, up to 6,000 highly-skilled, highly-paid technology employees will be able to fill that space. They will all be looking for housing and will expect that housing to be high quality and reflect their financial success.
Google subsidiary YouTube also rents a 41,000 square-foot video production facility in a nearby former Hughes building in Playa Vista.
Facebook may be leasing 35,000 square feet at Playa Vista’s Playa Jefferson.
Yahoo and Microsoft also have large presences in Playa Vista. And that’s just the big names.
This new technological hub is attracting not only local but out-of-area talent as well. For now, however, the big news is that available housing is definitely lagging and unable to meet the demand for young people flush with money and plenty of purchasing power.
Here are the hard, cold numbers: in Playa Vista, there are currently just nine homes for sale, only four of which are single family residences (SFRs). The cheapest home is $1,549,000. That price gets the buyer a 3 bedroom, 2,314 square foot home with no back yard, just a very modest patio with a view of the neighbors’ wall. Prices per square foot start at $630 and easily reach over $900.
In the past 90 days, the least expensive 3 bedroom home in the same area recently sold for $725,000 – again, no yard. The highest priced one was $1,850,000.
Fourteen homes – mostly condos – are in escrow.
In other words, there is a dramatic shortage of available housing in the area to soak up the demand of well-heeled home buyers. Any economist will tell you that when demand far outpaces supply, prices can only keep climbing due to shortage and what we call the inelasticity of demand.
Does this scenario still look like a bubble to you?
Big changes are on the way for Earvin “Magic” Johnson Park, now that the LA County Board of Supervisors has approved an ambitious plan to renovate and expand the already very large park starting in 2018. The six-phase project includes the construction of an amphitheater, event center, reflecting pool, and state-of-the-art sports complex, among many other amenities. It also calls for the annexation of the adjacent sites of the former Ujima Village Apartments and a daycare center, expanding the 104-acre park to a roomy 126 acres.
An announcement from County Supervisor Mark Ridley Thomas notes that the park improvements are part of a “renaissance of Willowbrook,” the unincorporated area of South LA that is also home to the recently revamped MLK Medical Center.
In a series of public outreach hearings, the project planners found that residents of the area had an array of concerns about the current park, ranging from security and safety issues to complaints about duck poop and worries that the park’s central pond may be contaminated.
These latter concerns are not unfounded—the park is situated on the former site of an Exxon Mobil tank farm, and in 2007 the Regional Water Quality Control Board ordered the oil company to begin remediating contaminated groundwater on the site. Construction on the first phase of the park redesign will have to wait until after environmental specialists have given the go-ahead.
So far, the most controversial aspect of the plan is the construction of equestrian facilities, along with a 1.75-mile horse path. While area groups like the Compton Junior Posse, a youth equestrian organization, have actively supported the facilities (naturally), some residents are concerned that they may take up too much space, or that they will simply smell bad. Expect this debate to continue for some time, as the equestrian center will not be included in early phases of the project.
Altogether, the redesign is expected to take about 18 years to complete, at a cost of up to $135 million.
No matter how many fond memories you’ve accumulated in your home, there may come a time when you start wondering: Should I sell my place? Maybe it’s because your local real estate market is booming and you stand to score a sweet payout. Maybe you’re relocating. Or your expanding family has outgrown your space. Or you’re just looking for a change of scenery. But questioning is easy; deciding to put your house on the market is tough.
Here are some steps to help you pinpoint when the time is right.
How to calculate your home equity
A key variable in the decision on whether to sell your home is how much equity you’ve built up over the years. Home equity is the amount of money tied up in your house—what you’d receive if you sold it, minus what you owe on your mortgage.
So how do you calculate your home equity? You’ll need two numbers: the remaining balance on your mortgage and what your home is currently worth. You can get a ballpark of the latter by typing your address into home value estimator. For a more in-depth assessment, ask your real estate agent, who will do an analysis by checking comparables, or comps (the prices of recently sold, similar homes in your area), as well as other aspects of your home.
Here’s how this calculation looks with actual numbers: Let’s say you purchased your home for $300,000, but its market value has risen to $325,000. Let’s also assume that you’ve whittled down your mortgage over the years so that all you owe is $75,000. To get your home equity, subtract $75,000 from $325,000 and you have $250,000 in home equity, which is pretty sweet!
Of course, the more you owe on your mortgage and/or the more your home’s price has plummeted, the less home equity you have. If that number is much smaller or even negative (which can happen if housing prices plummet), consider holding off on selling until conditions improve.
Is it a seller’s or buyer’s market? Here’s how to tell
Another factor in deciding if it’s time to sell is whether you’re in a seller’s market. This essentially means that the demand for homes is outpacing the supply, which gives sellers more leverage during negotiations. To figure out if you’re in a seller’s market, browse through some listings and look for these two signs: houses are selling for over asking price, and homes aren’t sitting on the market for long (generally less than six months). If that describes your area, then it’s a great time to sell. (Just don’t forget that if you sell, you may also have to buy, which may present problems unless you’re leaving the area.)
On the other hand, if homes in your area are selling for under asking price and sitting over six months, that means you’re in a buyer’s market and that market forces aren’t working in your favor. This means if you want top dollar you may want to wait.
What’s up with interest rates on mortgages?
If you’re planning to sell your home and buy a new one, you should definitely consider interest rates on mortgages. Fortunately, right now, interest rates are at historic lows, hovering around 4%. That’s an astounding deal! In the ’80s, they were a whopping 17.48%—and while they probably won’t shoot up quite as high in the near future, we’re expecting them to move up by next year. Homeowners eager to upgrade to their dream home might want to grab them while they can.
Have your housing needs changed?
Market forces and interest rates aren’t the only things to keep in mind when deciding if you should sell your home. A lot has to do with you, and whether the house suits your space requirements. For instance: Is your current place too small now that you’ve been joined by a couple of kids—or is it too big now that your grown children have moved out on their own? Both scenarios are fine reasons to find a home that better suits your needs, so be sure to consider all of these factors in weighing whether the time is right to sell.
When homeowners ask how to get a home sold, there is typically more to the question. For instance, some really want to know how to get it sold quickly, some are wondering how to sell a home to get more money out of it while others have a home languishing on the market and just want to know how to get the thing sold.
There’s no mystery to getting a home sold; it all starts with basic real estate principles and practices.
It’s important to know the current trends in your local real estate market before putting your home up for sale. Is it a buyer’s market – where there are more homes available than buyers? Or is it a seller’s market, with few homes available and lots of buyers?
Your local newspaper most likely covers your regional real estate market but this is also information you can obtain by asking your real estate agent.
This information is important for several reasons:
• If you can afford to wait to sell your home, the current market may be the deciding factor as to whether you sell it now or wait.
• It helps you price your home appropriately.
• It gives you an idea of what to expect during the time the home is on the market.
Another aspect of timing the sale of your home is the season. Home sales are seasonal and the ideal time to sell the home is in spring. This doesn’t mean, however, that homes don’t sell at other times during the year, even in the dead of winter.
In fact, although fewer homes are listed and sold in winter than in spring, the likelihood that you’ll sell your home is higher in the former than in the latter.
The number one reason a home sits on the market and doesn’t sell is price. To make matters worse, sellers of overpriced homes typically reject initial offers because they think they are too low, when, in reality, they are most likely close to the market value of the home.
In a buyer’s market, it’s even more important to price your home competitively. If you choose the right real estate agent, your list price should be very close to the home’s true market value. It’s up to you, then, to either lower it a bit to create more interest or to overprice the home and risk eventually having to drop the price.
It almost sounds trite in today’s real estate market to mention that a home needs to be cleaned and decluttered before putting it on the market. While the advice is common, it’s still very good. A clean home with maximum curb appeal will put your house above the competition.
Make repairs to anything that obviously needs it. This means dripping faucets, loose banisters, cracked windows – anything that a buyer will notice. These little things make it appear that the home hasn’t been maintained – something no buyer wants to take on.
We can discuss larger repairs and whether or not they should be tackled.
Your Realtor can make or break the deal. Keep that in mind when determining who to hire to assist you in the sale of your home. This is not the time to hire that friend of a friend or your Aunt Martha.
Choose your agent carefully and then work as a team, following up with one another frequently throughout the process.
Getting your home sold requires, overall, patience. Take your time with each step in the process, ensuring that nothing falls through the cracks. Listen to the advice of your real estate agent and you’ll soon be on your way to the next phase of your life.
Like shopping for anything expensive, shopping for a home requires research and a game plan. When you have a list of steps to take, the process will be far less perplexing and far more enjoyable. You’ll also be more successful if you have a strategy, so let’s take a look at some of the initial steps to take to get you into that new home. Check them off as you complete them.
Get ready to buy a home – check your finances
No, working on your finances won’t be the most exciting part of the process, but it just may end up being the most rewarding. Just as you wouldn’t go car shopping without knowing exactly how much you can afford to spend, neither should you step foot in even one home for sale without understanding where you stand financially.
A good place to start is with your credit score. If you haven’t checked it in a while, order your credit reports. By law, you are entitled to one free credit report (from each of the three reporting agencies) every 12 months. The only company that is authorized by the Federal Trade Commission to supply consumers with these free reports is annualcreditreport.com. I can also do this for you for $16
Go through the reports and dispute any errors you find. Fixing even one error may significantly impact your credit rating.
Then, go over your budget (if you don’t have one, create one using the template here). Tally up all of your debts and figure out how much money you have coming in every month.
Finally, determine where you can make cuts or how you can bring in more money to set aside for your down payment and closing costs. Your down payment requirement will depend on which loan program you use and closing costs, although variable, typically run between 2 and 7 percent of the loan amount, according to the National Association of Realtors.
Shop for a mortgage
Meeting with a lender is the next important step in the game plan. Based on the outcome of your first meeting with a loan officer, you can request a preapproval letter, which puts you in a strong negotiating position with home sellers.
Lenders want stacks of paperwork, all proving that you can afford a home. Plan on supplying your lender with at least the following:
- Tax returns, including Schedule C if you are self-employed
- Pay stubs,
- Bank statements (all pages, including the blank ones)
- Identification, including your Social Security card and driver’s license
The self-employed and those pursuing jumbo loans may be asked for additional documentation.
Make a list of must-haves in your new home
Now that you know how much you can spend on a home, it’s time to make a shopping list, which can include items such as:
- Location – proximity to public transportation, schools, shopping or whatever is important to you.
- Neighborhood must-haves – community pool, security gate, guard, trails, clubhouse, etc. Do you want friendly neighbors or those that keep to themselves? A neighborhood with or without kids?
- Architectural style – if you have a particular style in mind, such as colonial or Victorian, list that, as well as the number of bedrooms and bathrooms you need.
- Interior features – If there is anything you absolutely must have, such as a formal dining room or a chef’s kitchen, make note of it.
- Exterior – Do you need a large lot or just a small yard? Is a carport sufficient or do you require a garage? Don’t forget to list pool, spa, fencing and any other exterior features you want in your new home.
Finally, organize the list, placing the three most important items at the top. These are your priorities, and you should share them with your real estate agent.
Tip: To determine your priorities, think about what you find intolerable about your current living situation. For instance, if barking dogs drive you crazy, vow to find a quiet neighborhood. If you’re sick and tired of mowing the lawn when you’d rather be relaxing, seek a home with low-maintenance landscaping.
Find a real estate agent
Since you’re now ready to look at homes, you’ll need a real estate agent’s help from here on. Remember, the services of a buyer’s agent won’t cost you anything – the seller pays all real estate commissions, so there really is no reason not to have your own representation and many, many reasons you should.
While all of the steps in the above checklist are important, and should be taken in the order listed, securing the services of a professional real estate agent to help in the purchase of a home is critical. Having a pro represent your interests, negotiate on your behalf and walk you through all the piles of paperwork — at no cost to you – will give you peace of mind during the process.
Consider this: a mortgage program offers certain Americans a home loan with a zero down payment and no private mortgage insurance requirement. In addition, closing costs are limited and if the home is newly constructed, the builder must supply the buyer with a one-year home warranty.
Despite the obvious perks of the program, only 10.5 percent of the nation’s nearly 22 million veterans take advantage of this aspect of their Veterans Administration benefit offerings. When asked why, 33 percent of those who responded said they were completely unaware of the benefit, another group said that they went with the FHA loan because they assumed it was “easier” to obtain.
Obviously, the VA could be doing a better job informing (especially young) members of the military, veterans and surviving unmarried spouses about the VA loan and the mortgage industry could be doing a whole lot more to get the word out. So, today we’ll take a look at the program and learn why it may just be the best loan product on the market.
Remember, we aren’t VA, mortgage or financial experts, so consult with the appropriate professional should you have any questions regarding the VA home loan program and its benefits.
The basics of the VA home loan program
Like the Federal Housing Administration (FHA) program, the U.S. Department of Veterans Affairs doesn’t actually make loans, but offers lenders a guaranty, if the veteran defaults on the loan. Should this happen, the VA will pay from 40 to 50 percent of the balance of the loan (the percentage depends on the size of the loan).
As you can imagine, this promise enables lenders to relax when faced with a borrower who may have little or less-than-perfect credit and a lower-than-average income.
So, what can you do with the VA home loan program?
- Buy a home (a condo, too, if it’s in a VA-approved community)
- Build a home
- Simultaneously buy and rehab a home
- Buy a lot and/or manufactured home
Is the VA loan harder to qualify for than the FHA loan?
No-one quite understands why so many current members of the military and veterans assume that the FHA loan is easier to obtain. Although there are additional steps you’ll need to take when pursuing a VA loan, they are quick and somewhat easy (if you have the right lender).
To qualify, you’ll need to say “yes” to at least one of the following questions:
- Were you on active duty for at least 90 consecutive days during wartime?
- Have you served at least 181 days of active duty during peacetime?
- Have you served in the National Guard or Reserves for more than 6 years?
- Are you a widower or widow of a military service member who died either in the line of duty or as the result of an active-duty service-related injury or disability?
The biggest advantages of the VA loan
As previously mentioned, the biggest advantage of the VA loan is that you won’t have to put any money down. Now any conventional or FHA-backed loan for which a borrower submits a less-than 20 percent down payment will require the purchase of mortgage insurance (the Mortgage Insurance Premium in the FHA loan and private mortgage insurance, or PMI, with a conventional loan).
These policies cover the lender in the event the borrower defaults on the loan. This insurance, which benefits the lender should the borrower default on the loan, can add quite a chunk to your monthly mortgage payment. For instance, FHA’s annual mortgage insurance premium for a 30-year fixed-rate mortgage with 3.5 percent down payment is 0.85 percent annually.
The VA loan has no monthly mortgage insurance premiums, closing costs are limited and there is no prepayment penalty. With no monthly mortgage insurance premium, the veteran’s house payment each month will be less than if he or she had obtained an FHA loan.
The VA home loan process
Yes, there are a few more hoops to jump through when dealing with the VA. Eligibility requirements, however, are much like those for FHA and conventional loans:
- “Suitable credit.” The VA doesn’t really explain what they mean by “suitable.”
- You should be able to prove that you have the income to cover all your bills and the house payment.
- You must live in the home (you can’t rent it out).
- You must present a VA Certificate of Eligibility (COE). Most VA-approved lenders can access your COE online or you can access your COE on the eBenefits page of the VA website.
The biggest hurdle for vets is that these loans are provided by lenders and they all have their own guidelines. Shop around until you find one that you feel you can work with.
The West Coasts Premier Urban Professionals – Ski/Snowboard Weekend
March 10-12, 2017
Vacation with other urban professionals from across the country at Nevada’s premier winter resort. This vacation has something for everyone, including non-skiers/boarders; you won’t want to miss this experience!
Snowboard, ski, snowmobile, tubing, casinos, ice skate rink, dog sledding, carriage rides, gondolas, parties and more
Come for the snow or come for the parties ALL are welcome!!!