Fannie Mae Changes Non-Warrantable Condo Mortgage Guidelines
As home values and mortgage rates climb, housing payments consume more of a home buyer’s monthly income; an update on today’s mortgage rates and a look at the 5-day trend for interest rates; and, Fannie Mae loosens its condo mortgage guidelines, making it easier to qualify and cheaper to get financed.
Buyers Spending More On Mortgages
Home buyers are spending a higher percentage of their paychecks on their housing this year.
According to a report from mortgage data firm Black Knight, the typical home buyer now puts 22.8 percent of its income toward a mortgage payment, which is the highest recorded level since 2010.
The bump is the result of rising mortgage rates, plus ongoing increases in the costs of buying a home.
Rates sit a half-percentage point higher as compared to the start of the year, and home values are up close to four percent nationwide.
For buyers of homes, though, home affordability is about more than just the mortgage. The additional expenses of owning a home matter, as well.
In addition to the mortgage payment, a homeowner’s financial obligations include:
- Homeowners insurance, which you should shop every six months
- Real estate taxes, which are re-assessed annually
- Mortgage insurance premiums, for loans that require it
Plus, there are costs associated with seasonal and annual maintenance and upkeep.
Buying a home requires buyers to consider each of the costs of homeownership; then, to consider the benefits. And, there are many benefits — both financial and psychological.
Don’t go at it alone. Talk with real estate agent about your homeownership ideas, and how to buy a home that works for your goals.
Home affordability isn’t as high as it was, but there are still great deals to be found.
Current Mortgage Rates & Interest Rate Trends
Mortgage rates are improving today.
For buyers of homes and refinancing households, interest rates are lower on all loan types and loan terms, including for the 30-year fixed, 15-year fixed, and 5-year ARMs.
Rates for niche loans including the 100% loan for doctors are down, too.
- Conforming mortgages: Higher
- FHA mortgages: Higher
- VA mortgages: Higher
- USDA mortgages: Higher
- Jumbo mortgages: Higher
Mortgage rates vary by applicant. The rate quote you get from a lender will depend on your loan size, your credit score, and where you live.
Your choice in lenders makes a difference, too, so make sure to comparison shop with more than one institution. Talk to as many lenders as necessary to find your preferred combination of rates, fees, and service.
Get A Free Rate Quote
Fannie Mae Overhauls Its Condo Mortgages
New mortgage guidelines make it easier to get a condo loan.
In a series of changes effective June 23, 2018, Fannie Mae re-classified millions of condo units nationwide, designating many of them as warrantable condos.
A warrantable condo is a condo in a low-risk building that meets the lending standards of government-backed entities Fannie Mae or Freddie Mac.
Warrantable condos can be financed using a conventional home loan, and programs are available with low- and no-downpayment options for interested buyers.
The opposite of a warrantable condo is a non-warrantable condo and non-warrantable condos are ineligible for government-backed loans because of their risk.
Some of the scenarios that make a condo non-warrantable include:
- Real estate investor concentration is too high within the building
- The ratio of commercial-to-residential square footage is too high
- There are Pending lawsuits against the condo association
Because the government won’t back non-warrantable condos, getting a loan for a non-warrantable condos is more difficult.
First, you have to find a lender that does non-warrantable loans. Then, once you find one, you’ll also find that your down payment requirements are higher, and that your interest rates are higher, too.
Non-warrantable condo loans carry interest rates that are one percentage point or more above the rates for a comparable warrantable condo.
Fannie Mae’s new condo guidelines change what it means to be warrantable.
Some of the changes include increases in the allowable commercial and retail space in a condo building to 35 percent of the building’s total square footage, up from twenty-five percent; and, a change in maximum ownership concentration in a building.
The changes target buyers and condo owners in buildings that are new, or recently built. Fannie Mae’s update converts these buildings and their units into warrantable condos.
Cheaper mortgage rates and loans that allow lower down payment amounts are available. Condo insurance rates should be cheaper, too.
If you live in a condo today or plan to buy one this year or next, get with a mortgage lender immediately because a warrantable condo deserves a warrantable condo interest rate.