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What is A Condo Association?

Tulsa, OK, HUD Approved Condo

Largest HUD approved condo complex in Tulsa

What is A Condo Association?

This is a question often under-looked by Tulsa, OK, condo buyers.  Condos may provide great bang for the buck, inexpensive amenities and low-maintenance, but this is accomplished through all of the homeowners in the building working as a cooperative.  Often, condominium buyers do not give enough consideration to the quality of the Condominium Homeowners Association.

My first piece of advice, find out if the association has completed HUD approval.  Click here to read more about HUD Approved Condos.

Not All Tulsa, OK, Condo Associations are Equal.

Many Tulsa, OK, neighborhoods have a Homeowners Association, or HOA for short.  They are designed to maintain “standards” for the development and keep the neighborhood in good repair.  The developer of the neighborhood typically funds the HOA, establishes the association with the rule and regulations it will uphold, and then hands it over to the homeowners as properties are purchased.  Some neighborhood associations are strong and highly involved in the maintenance of the neighborhood, and some are more social, used to promote the community.  And all the while, many other Tulsa, OK, neighborhoods maintain themselves beautifully without the help from an association.

Condominium Owners Need Associations.

A condominium will always have any association, and it always needs to be strong.  Condominiums share significant amounts of commonly owned property, such as the roof, parking, landscaping and many other common areas.  Each owner exclusively owns their individual unit, but the elevator, swimming pool, and other building amenities required shared maintenance. When you buy a condo, you are entering into an agreement with all other owners in the Condo Association.  All association members agree to upkeep their individual unit and to additionally contribute to upkeep of the shared property.  This provides an economy of scale, and shared costs can provide for very inexpensive benefits.  But if you condo association is weak, you can find your condo association difficult.

How Do You Know if a Condo Association is a Good One?

Well, you have to ask questions:

  • Meeting of the Board

    What I see at Board Meetings where I live.

    What are the condo association rules?  Your parking spaces, swimming pools and patios will all be governed under the condo association rules.  If having pool parties is important to you, ask for the rules.

  • How much are the condo association fees?  Fees vary by community and may cover vastly different items.  Ideally, fees help all association members acquire benefits less expensively then what they would get them for individually.  Possible considerations may include maintenance of the building, insurance of common areas, utilities, amenities, etc.  The point here is to ask and to understand what the cost is and what it includes.
  • Is the condominium complex professionally managed?  You will want to ask for the contact information for whoever runs the property.  It is important to identify who fixes what.  Contact the property management staff or the HOA for all of the information you will need.
  • How much money is in the reserve fund?  Generally, you will want to see 15% – 30% of annual expenses in a reserve fund.  The older the building, the more the maintenance, and the more you will want in the reserve fund.
  • What is the Condo Association’s history regarding special assessments?  These are a one time fee used to cover an unexpected or large expenditure.  If it cannot be covered by the budget or the reserve, a special assessment is required.
  • Rental-agreement-e1347797065418

    Best Practices: Obtain & Read all paperwork

    Is there any pending legislation against the condo?  I know of at least on Tulsa, OK, condominium association that is currently encumbered with a lawsuit.  A lawsuit may impact all homeowners.

  • What is the Condo Association’s rental policy?  A high number of renters can have a negative impact, and many lenders are more reluctant to to give loans on these types of complexes.  Most lenders look for at least two thirds owner occupancy.

Tulsa, OK, condominiums have appreciated at a higher rate than single family homes over the last 2 years.  But this is mostly due to the fact that during difficult economic times (2008-2011), they depreciated faster as HOAs scrambled to absorb foreclosure losses.  If too many units stop paying association dues, the association’s budget falls apart quickly.  They may offer advantages to home buyers such as affordability, the need to downsize or possibly not wanting to have the maintenance issues of single family homes.  But before buying  a condo, make sure you know who you will be partnering with and what the rules are.

Copyright 2014 John Regur All Rights Reserved – Originally posted at: Tulsa Oklahoma Midtown Mortgages – John Regur

Posted in: Condos

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Tulsa, OK, Condos Appreciate Faster than Comparably Sized Houses

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Tulsa, OK, Condos Appreciate Faster than Comparably Sized Houses

A condo can be a great retirement investment if you let a renter pay for the equity on your behalf.  It is the only retirement investment I can think of where you can get someone else to make your entire monthly contribution.  I don’t know how to teach you to get someone to buy you an annuity or IRA, but I do know how to collect income streams off of real estate.  Next to employer matched 401k’s, Condo income-streams, for me, are a strong recommend.

Condos are making a comeback.

Income – Costs = Profit

Condos have better fixed costs than rental houses.  The maintenance expense is minimal, condominium property insurance is a slightly more expensive than renter’s insurance, and real estate taxes are thinned by the quantity of units.  This is a sexy investment.  Some are high-rises looking over rivers and downtowns.  Some are nestled in tree-lined greens of common area.  There is a Tulsa, OK, condo that is built in a public park.

Condos are appreciating Faster

As compared to one year ago, condo values are appreciating much more aggressively than single family residences (reference to the  Case-Shiller Index).

Five years ago, condominiums were among the most distressed sectors of the United States housing market.  Investor’s had bailed out on depreciating assets, and condos became more and more unwanted.  As condo unit owners stopped paying, their condo associations became under-funded, and unable to pay the unit’s common-expenses.  Many complexes failed, and values diminished.

Opportunities in the market

Tulsa, OK, condominiums are making a comeback.  Today, along with the revival of urban living, the condo lifestyle is becoming more popular. And many are virtually maintenance free.  Condo developements represent one of the best places to find real estate, and potential future cash streams, at “good value” prices.  Whether as an owner-occupied residence or as a rental income stream for life, there are opportunities in the market.

To get interest rates and costs for condo financing, click here.

For HUD approved condos, click here.

 

Posted in: Condos, First Time Home Buyers

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How Are Credit-Score Points Earned?

FICO ScoresHow Are Credit-Score Points Earned?

The official FICO scoring model runs from 300 to 850 points.  But your score will very based on the type of credit you are applying for.  There are differing score-models for each type of inquiry:

(in order of risk preference)

  1. Credit request for a mortgage – BEST
  2. Credit request for a car loan
  3. Credit request for a credit card account
  4. Credit request for a store credit card or consumer loan – Worst

Mortgage and Auto Loans are considered more positive because the debt they create will reduce as monthly payments are applied.

Credit requests for credit card loans usually hit the scores the hardest.  This is because the debt balance is expected to go up every month until there is enough account history to show otherwise.

Once a negative condition hits your credit report, the damage is done. Paying a collection account will not regain the points you have lost.

Credit Score Breakdown

65% is tied to 2 things

  1. Payment History
  2. Credit Utilization
  • The amount of money you are borrowing and whether you are paying your creditors back is the primary source of high credit scores

15% is tied to the amount of time you’ve had credit in your name

  • The more time you have spent managing good credit the higher your score will be
  • First time borrowers bring an added layer of risk

10% is scored on the type of credit used

  • Auto loans and mortgage loans are scored as a positive.
  • Credit Cards are negative.
  • Pay Day loans almost ensure credit score deficiency.

10% is scored on a category deemed “new credit”

  • This is an assessment of the most recently opened accounts and the types of credit that have been applied for.
  • It also scores on how long it has been since you opened an account.
  • At the maximum this category is worth 85 points to your FICO.

A mortgage credit inquiry will lower your credit score by 5 points.  You can have as many mortgage credit score inquiries as you want for 14 days and you will only receive one reduction for 5 points.

Posted in: Condos, Credit, First Time Home Buyers, For Buyers, Household Finances

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Tulsa, OK HUD Approved Condos

Tulsa CondominiumTulsa, OK HUD-Approved condos are hard to Find.

Tulsa OK HUD-Approved condos are hard to find. What does this mean for Tulsa condo owners trying to sell their condo?

This is a HUGE concern for Tulsa condo sellers, particularly if their condo is priced $250,000 or below. Not being able to accept FHA, VA or Section 184 Indian Loans literally removes 95% of prospective Buyers. How long will your Tulsa condo be on the market if you have to wait for a cash buyer or one with conventional financing with 20% down? Cash buyers expect a deal and may not be willing to pay fair market value. Buyers with conventional financing and 20% down are not usually shopping in the lower price ranges – OR do not want to tie up their cash on a large down-payment when it’s so inexpensive to borrow money.

And none of these loan programs (FHA, VA or 184) are available if the condo property is not HUD approved.

HUD Certified condominium complexes offer distinctive advantages over Non-Certified properties by qualifying for:

  • Lower down payments
  • Section 184 allows for 97.75% financing without monthly mortgage insurance
  • VA allows for 100% financing without mortgage insurance
  • 6% seller contributions are always available (conforming loans on condos usually allow only 3%), which equals less costs at closing for the buyer
  • Debt to Income Ratios and credit underwriting are much more lenient
  • You can borrow up to 110% so you can purchase and remodel in one loan
  • You can do an energy efficiency loan to replace windows, appliances, water heater, doors, etc.
  • Down Payment Grant Programs and Bond money most often amend FHA loans (click here for condo down payment assistance program)
  • Owners can be selling to a larger portion of the home buying market
  • It increases demand

Get an FHA Condo mortgage quote here

So what is HUD approval?

HUD oversees the FHA mortgage program, the VA sponsored program (100% financing) and mortgages back by the Bureau of Indian Affairs (checks and balances).  Since 2009 HUD has required condominium complexes to be “warranted” to be accepted for HUD mortgage programs.  This generally means an audit needs to be done to make sure the common areas are maintained, the complex is fully insured, association dues are 85% current, mostly owner occupied, the association is controlled by unit owners, etc. – mainly: just being well managed.

So Why are HUD Approved Properties hard to find?

Up until 2009, HUD allowed FHA mortgages to be placed on condo units through a process called a “spot check”.  That meant they would gather papers from the condo complex in a random, per-transaction method, and approve the quality of the complex on each individual loan.  This was inefficient and FHA absorbed many foreclosed loans due to condo association failures.

Then came 2009.  HUD does not allow spot checks any more.  The complex must get certified.

How To Become a HUD Certified Complex?

HUD is pretty friendly when it comes to approving well-managed properties.  They want to promote urban growth and are rebuilding their HUD approved roster.

The Distinction of Certification comes from one of two ways:

Go to HUD Directly – Called a HUD Review Approval Process (HRAP).  The process, if done well by you mortgage consultant, should take 6-8 weeks.  The application itself is free, but self-managing the process is not wise for amateurs and in reality fees will be paid to attorneys, management companies, appraisers, etc. to prepare the finalized application.

Use a HUD Direct Endorsed Lender – Called a Direct Endorsed Lender Review Approval Process (DELRAP).  Now a HUD direct lender is not the same as a lender that offers FHA mortgages.  Contact me to avoid middlemen and get one in your area.  This recommended route would usually take approximately 2-3 weeks.  DELRAP generally costs on par with a HUD direct approach but the process is faster and moderately more stream lined.

We will need some basic Condominium Association Documents:

  • The Declaration of Condominium, CC&R’s (Covenants, Conditions & Restrictions)
  • By-Laws of the HOA with (if applicable) amendments
  • Copy of the Current Annual Budget
  • Insurance Certificates held by association which should include General Liability and Hazard on Common Element Buildings
  • 90 days balance sheet

I can get you there.  Condo associations should usually be protecting the interests of the owners by keeping the condo development HUD-Approved.  This will increase the number of buyers who can purchase units in the development, which in turn increases the demand to buy into the development and helps support property values.

If the article doesn’t answer all of your questions, please don’t hesitate to drop a question in the commentsor for direct communication, please call me at 918-949-7248.

 

Posted in: Condos, FHA, First Time Home Buyers, For Sellers, Mortgage Types, Section 184 Indian Loans

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