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The Elves Need To Get Busy...

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Posted 12-09-2011 at 12:28 PM by Roy Sanborn

As of December 1, the residential home inventory was bulging like the sack of toys in the back of Santa’s sleigh! There were 1168 residences available at an average asking price of $498,326 in the communities covered by this report. That is up from the 1074 available last December at an average price of $548,594. The median price point is down from $279,900 last December to $259,450 this month indicating that there are more lower priced homes on the market. The current inventory represents a nineteen month supply of homes to be sold. The elves need to get busy...

The mortgage industry meltdown has certainly made buying a home in today’s market a somewhat daunting task. Lending requirements are back to basics with a renewed emphasis on the "three C's of credit": credit history, capacity (your ability to pay back the loan) and collateral (the value of your property and your down payment or equity). That’s the way it used to be so that's really a good thing.

But with Fannie Mae and Freddie Mac guaranteeing the bulk of all home loans today they are going to rather extreme lengths to ensure that there are no bad loans written. Buyers face more and more demands to prove income, verify assets, show steady employment, and explain things like small bank account deposits. In addition, not only does the property being purchased have to appraise, but the property itself goes under a lot more scrutiny. Concerns about the condition and state of repair of the property often can affect getting a mortgage. The National Association of Realtors has gone on record stating lending regulations are too tight and are hurting the housing recovery. From what I see I would agree. The pendulum has swung too far. That’s the bad thing.

One housing segment that has been hurt by even more regulations are condominium complexes. In order for someone to purchase a condominium with a loan backed by Freddie or Fannie the condo association must meet some pretty stringent guidelines. So it’s not just the buyer’s credit that is checked, the condominium association’s financial picture is closely scrutinized and must be approved. For example, condo associations must have a minimum of 10% of their annual budget set aside for reserves. No more than 15% of the units can be more than 30 days delinquent on their condo fees. No more than 10% of the units can be owned by a single entity and no more than 20% of the project can be “non-residential space” such as restaurants or shops. Buyers are also required to get condo unit owners insurance and the association must have fidelity insurance if it is larger than 20 units in order to ensure that the association funds are protected. There also can be no litigation against the association with respect to structural soundness, safety, or habitability of the units.

Essentially, what this means is that if a project is not approved by Freddie or Fannie then the only way a buyer can purchase a unit is with cash or a conventional “portfolio loan” from a local bank with 20% down. As many of the buyers for condo units in our area are first time buyers and need to use FHA financing with a lower 3.5% down payment these rules really limit those buyers’ choices. Some condo associations, like Waukewan Village in Meredith NH, have taken the initiative to get their complexes approved in order to make it easier for their owners to sell should they desire. That’s pretty smart. Waukewan Village is the only association in Meredith currently approved. In Laconia Weirs Crossing, Quail Ridge, Water Street Condominiums, Beaver Pond Estates, and Meadowbrook Town Homes also have approvals. There are currently no associations approved in Belmont or Gilford although Mulberry Hill in Gilford is currently in process. HUD.gov has a page that consumers can go to and check which complexes are approved. Some lenders are given designated underwriting authority by HUD to certify that associations meet the requirements and that could certainly save buyers some time. So if you are considering a condo purchase you should check to see whether they meet with Fannie or Freddie’s approval.Your local REALTOR® would be happy to help you and answer any questions you may have.

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