Mortgage Rates Improve While Condo Loans Get Harder

We track mortgage rates as they cool after a brutal, volatile week and explain what’s driving the swings. We also share the deal-saving habits that keep buyers on track, especially around credit changes and condo approvals. 

• mortgage rates improving into the low sixes with sharp day-to-day volatility 
• warning buyers not to open new credit or buy a car before closing 
• continuous credit monitoring that can surface last-minute debt 
• verifying condo approval for Fannie Mae, Freddie Mac and FHA before offering 
• using recent closed sales to infer financing viability in a condo community 
• why large lenders often approve or deny condos without guidance 
• what non-warrantable condos mean and why 20% down is common 
• HOA master insurance policy choices that can block financing 
Please reach out to Nikki 

Transcript

SPEAKER_01 0:37

All right. Welcome to the Monday Market Update. It is March 16th. Nikki, what you got for us?

Mortgage Rates Ease After Volatility

Credit Rule Before You Close

Condo Approval Checks That Matter

SPEAKER_00 0:43

Good morning, everyone. Well, after an extremely volatile week last week with mortgage interest rates creeping up into the mid-sixes, we're starting to see some relief today. So that is actually really good news. And for me personally, because you know, this type of thing stresses me out when I can't get great rates for my clients. So we are seeing rates back into the low sixes, sometimes hitting into the fives, depending on certain situations. So we saw a 30 basis point improvement already this morning. We're hoping that that holds throughout the week so that we can continue to get these interest rates back in line with where they were. Scott Bessant came on record and just basically said, everyone, chill out. Everything's going to be fine. We, you know, we do have the Fed meeting this week. We aren't going to lower the interest rate during the Fed meeting, but we are, you know, things are looking good from that standpoint. The big thing again is the oil situation. So trying to get that oil through the Strait of Ormez in the Middle East is really where the concern is. And that's what's making the bond market kind of do this volatile dance that we've seen. We expected it to kind of come back in line last week. All last week it was just an absolute annihilation on the market. And now we're starting to see some improvement. So we're hopeful that that'll continue this week. And it and it should really continue this week. So a couple of things I want to put out there as reminders to your clients. Number one, first and foremost, do not go buy a car two weeks before closing. So I have been dealing with that specific situation with some clients of mine. So just a good reminder to your clients, to your buyers, don't get new credit, don't do a new credit card, don't buy a car, don't do anything fun. I don't care if your loan is clear to close and you're just waiting for the closing day to happen. Don't go car shopping this weekend. It's not worth it. Trust me. Because I'm going to have to be the one to tell you to bring the car back to the dealership and cancel the entire thing. And that is not a fun conversation to have. So remind your clients as they're going through the buying process to not touch anything on their credit. No new debt, no nothing. That is one of the first things I ask my clients when they go from that pre-approval status to getting the purchase agreement. Have you done anything on your credit between the last time that we checked and this time? If you say no and you have, I'm going to find out about it. We have a bunch of checks and balances that happen. Anytime you get pulled credit, it is a continual monitoring system until that closing date. So even if you think everything's okay and you're signing papers on a Monday and you go out car shopping on a Saturday, I'm going to find out. So it's one of those things where make sure to remind your clients, remind them, remind them, remind them. Do not do anything with your credit. So just a little FYI for you. The other thing I wanted to talk about that has come up recently that actually Angie and I are dealing with right now is the condo approval prod approvals for Fannie Mae, Freddie Mac, and FHA. So really, really, really, really, really important when you are shopping with your buyers to if they are looking at condos, number one, make sure the property is actually a condominium and not a townhome because there's different requirements. And number two, if it is a condo, call up your lender, have them check the approval status for that particular condo as it relates to FHA or conventional financing. These are all things that we should be able to look up. If you can't get a hold of your lender, one thing that you can do as an agent, you can do a historical look back in that town in that community of what has closed and what type of financing was closed for the last three months of sales in that particular community. That will give you a clue in as to was this able to go conventional financing, was this able to go FHA financing? Don't trust what the HOA management company is going to tell you about whether or not this is approved or not. You need to really do your own research, make sure you look at historical sales, have talk to your lender, see if they've ever lented in that community, see if they can look it up for you, things of that nature so that you can make sure that as these, as you're offering on different condominium condominium projects or condominium properties, that the approval process will not be as, I should say, disastrous as it can be. So we are actually currently working on a client who we are trying to get Fannie Mae approval for. And Fannie Mae particularly has an online source where they will put condominium association names in and tell you why they are denied or why they can't get approved. In this client's particular situation, there was an issue with the homeowner's insurance and the roof coverage of that insurance. And so working through the details of that, trying to get the answers that we need has been quite an adventure. So just as another FYI to everybody, if you have clients that are looking at condos, use your resources before you're making offers to look at the historical sales, how they were financed, and whether or not it makes sense for you to offer conventional financing or FHA financing on a particular property.

SPEAKER_01 5:36

Yeah, and absolutely a shout out to Nikki. She's saving the deal. So she's actually taking in the buy, taking on the buyer who is the buyer for my listing and my clients are client. I mean, it's just it goes so deep, but the lender that this buyer was currently with just denied. All of a sudden, after a week or week past closing, we can get it done. We can get it done. It's like, oh, nope, we can't done. And not even a phone call. And Nikki stepped in and the communication has been top-notch, which is so appreciative. I mean, I can't tell you how hard it is as an agent when you don't have answers and the lender's unwilling to talk to you on the phone, unwilling to call you, unwilling to answer more than one sentence in an email. So once again, and I say it a hundred times and I'll say it a hundred more, who you partner with matters. And as a listing agent, follow your intuition. Because I had an intuition about this, and I talked to the buyer's agent. I'm like, I don't know about this. What like, do you know this lender? Do you because I've had issues in the past and da da da da, and I won't throw anyone under the bus company-wise, but I I just kind of knew. I I looking back, and I know to follow my intuition, and I should have pushed harder for a second source, but I also am spoiled in the fact that I know I have Nikki in my back pocket to get me out of jams like she's doing right now. I mean, she picked it up and we're getting the appraisal transferred, and she's absolutely saving my ass, and she's saving the entire deal and helping some homeless sellers because the sellers had already moved out, they're in a rental, the buyer's now in a rental, and we're just working together as a full team to get this closed. So, Nikki, thank you again for saving this. It's it's above and beyond what most people do.

Non Warrantable Condos Explained

SPEAKER_00 7:25

Yeah, it's funny because you know, and when you and I were talking about this on whether or not this could be saved, I actually ended up getting another phone call from another agent who had heard about me through the title company that we're using to close on this file. And she's like, I have this condo situation. Another big lender denied the condo, and they just when you use a larger lender on a condo project, it is literally you take the package of condo docs, you send it to their condo team, and they either approve or deny. There is no explanation, there's no, hey, this is how you can get it approved. There's none of that stuff. It is just approve or deny, and they send it back, and then it's just left there. So in this other particular situation, the condo is what we could categorize as a non-warrantable condo. The non-warrantable side of it means that they aren't able to get financing from traditional resources, traditional resources like Fannie Mae, Freddie Mac, or FHA or VA. So we have to do what's called a non-warrantable condo loan. And what that requires is that requires the client to now put 20% down towards the property and has some more restrictions from a credit standpoint as far as credit score goes. But interestingly enough, at where I'm at at kind lending, we do have a very specific portfolio product that is very that is specific to non-warrantable condos that will give similar interest rates than you would receive on a on a condo on a normal basis. The big trick is that meeting that 20% down requirement because there is not a mortgage insurance company that will insure under a non-warrantable condo. When I say non-warrantable, this condo in particular has a deductible that is over 5% of the coverage amount. And in some cases, depending on where that deductible is and how much over that 5%, you can, as a homeowner, insure against to cover the gap between the 5% and the actual deductible amount. And then that insurance is sufficient to get you fanny-made coverage, but that only applies to certain types of deductibles. In this particular case, it does not apply to the building or the structural deductible being over 5%. So a lot of these condo associations have no idea what they get themselves into when they're trying to decide on insurance and they're trying to decide on the condo rules and things of that nature. Most of what I see from a condo issue has to do with the insurance, the master insurance policy, the agent, master insurance agent not understanding what is required, the board of directors or the almost, I'm sorry, not board of directors, but the homeowners association board. You have to remember that this is the board that is making these decisions on the types of coverages that they want from an insurance standpoint. And what happens is the board members, our owners, our condo owners in those particular properties. They don't know what types of insurance they need to have on these condo associations. So unfortunately, there's a clear issue when it comes to, oh, we want to save money for the association. So we'll increase our deductibles on our insurance coverage, or we won't cover the roof, or we won't cover, you know, one particular part that is required from a financing standpoint. So it's really not easy to be able to tell when you may have a condo that it hasn't been able to be approved because you won't see any sales in the last three months, or the sales that you will see will be cash only.

SPEAKER_01 10:50

Yeah. And I remember you made a comment last year. You're like, I could make make a full-time living just going and being a consultant for these boards. So they know they don't know what they don't know. They don't know what they're doing and they have no one guiding them. They it's just they're like, okay, well, we'll just do this. And yeah, I mean, yeah, if you're getting a no or if you're running into issues, please reach out to Nikki because what I know about well, and I don't work often without Nikki by my side. Um, but when buyers come with their own lenders, such as this one, many people just hear no, and that's all they do. They're just gonna take the no and run with it. And what I love about you, Nikki, is you say, not this, but what. So it's always about just trying to get to the end post through a different lane or a different way. And a lot of lenders, you know, when they hit the yes or no, if it's no, that stop. And it's just not with you. So I just appreciate you so much and how you show up in the big picture thinking. And if not this, well, let's go here and let's go there. And truly exhausting all resources, which many lenders besides you, I don't see doing that. So thank you so, so much again.

SPEAKER_00 12:01

Absolutely, absolutely. It's one of the things that I do enjoy ironically about my job is being on these rescue missions and trying to help these clients who have been told no that that there is a yes somewhere around there.

Thanks And Next Week Preview

SPEAKER_01 12:14

Wonderful. Well, thank you again so much. Appreciate you. And yeah, we'll all have good news for you next week. It sounds like getting it done. It's amazing. Oh, well, thank you. Yes, and we'll uh we'll talk soon and we'll see you guys all next week on the Monday Market update. Perfect.

SPEAKER_00 12:30

Bye, everyone.

SPEAKER_01 12:31

Bye-bye.