Where readers ask and we (the community, because Lord knows we don’t know everything) try to answer:
Hey there,
Wondering if anyone else there has gotten wind of a problem we’ve been running into:
My partner and I put in an offer on a 2 bed/1 bath condo in the Mission in mid-November. Offer price was $740K, and we put down $75K. A mortgage broker had confirmed that he would be able to get a loan with only ~10% down, as my partner and I both have steady jobs with good income (~$200K/year total), and our credit scores are both around 800. We went through the whole process and the loan came through fine, but the deal fell through at the last second because the mortgage insurance company claimed that they had had a significant change in policy a few days before and were “no longer insuring condos with loan amounts over $650K in California.”
We moved on to a lender at Bank of America, who assured us that “they have different relationships with the MI companies” than the brokers do. We gave him the whole story, but lo and behold–same exact thing happened. He acted all surprised and said that even the MI underwriter had just told him the day before that everything looked good, and then she found out about this new policy (which supposedly went into effect 11/30).
The MI company both lenders were trying to use was Radian, but they supposedly weren’t able to find a work around with any of the other MI companies, either. It just seems strange that none of the lenders we’ve worked with (we’re on our 3rd one now and fully anticipate running into the same problem, though he also is assuring us it won’t happen but can’t even tell us what MI company they use) seem to know about this at all. And it seems odd that the mortgage insurance underwriter didn’t find out about it until reviewing our application in mid-December after the change went into effect 11/30.
Has anyone else run into this? Is nobody in this city buying places that require MI anymore? Any thoughts or ideas on ways around it? Thankfully the sellers have been very patient and understanding–I can’t say that I would have been if I were in their situation, but we’ve done everything we can.
Thanks!
Thanks for the email and question. We’re sure there is someone out there (the Banker) that might be able to shed some light on this, or perhaps another buyer. Luckily, our recent transactions have been with cash buyers, or 20-30% down, and we have not experienced this. So….we’re calling on the community. Let’s not disappoint this reader, because all we can do on this end is thank him for hanging out on theFrontSteps, emailing in, and hope he comes back.
Honestly, I don’t think anybody pays MI anymore. Everybody puts 20% down, or in some way shape or form, comes up with 20%. You can put 10% cash down, and get a 10% HELOC for example (which is currently at only 3.5% now) to avoid MI.
If you cannot come up with 20%, and still have 2+ years of monthly total expenses left, I recommend you just continue to pay rent.
Rates are so damn cheap now though, it is awesome!
This really is a sorry turn of events for the real estate market. It is bad enough that the underwriting requirements are so stringent. Now they mamke it impossible to get mortgage insurance, too. Who has $150k to put down?
In my experience last month buying a house in the east bay, the only options were to put 20% down or go with an FHA loan at 3.5% down. However IIRC the FHA isn’t an option here because this condo is above the limits of the FHA even if he is a first time home buyer.
Allen – I think a TON of people have $150K to put down for a property. You just need to work for 3-5 years out of grad school, and you’re there, or 5-10 years out of undergrad, no problem.
Would you argue that many 30-35 year old first time homebuyers don’t have 150K in the bank? I would find that strange, considering 1st year Associates in finance start at $150k/year.
There were some major changes to the Mortgage insurance rules in Mid November and swept across most of the companies I know, that still exist. Like Banks, Mortgage Insurance companies are constantly changing their guidelines and as far as I know, all mortgage insurance companies have deemed the entire state of California as a Restricted/Declining market and 85% LTV is the top or the scale. I only know of 3 maybe 4 Mortgage Insurance companies insuring and all have pulled back, dramatically. And, then, they have very strict condo requirements and are running scared.
I agree with 40 yr old, but Helocs are also hard to come by. We have really entered a 20% down world. . .and even then, a loan is hard to come by.
If I were you and you love the condo, restructure the loan, find the down money, and take 1 loan at 80%/$592K. Rate is close to 5.5%. . .maybe lower, no points. Feel free to ask alex for my email. . .
40 year old, there aren’t exactly a lot of those finance jobs around any more. Law firms too, especially with Heller and Thelen closing, Gunderson laying off first years, Latham freezing salaries… If you think people coming out of grad school with 6 figure debt making 150k are saving 50k/year in post-tax cash after renting a decent place, maxing out 401ks, getting a car, going out, buying new work clothes, etc, you’re delusional. Oh yeah, and they would have had to avoid losing 50% of their down payment money in the market crash, too.
The pool of eligible buyers is drying up. No matter how many rich friends you have, there really aren’t that many out there itching to buy 2/1s in the mission.
first things first- if you don’t fund the loan in the next few days you’ll only be able to gt a 1st loan of 625K. In fact most lenders stopped funding the temporary high loan balances as of the 15th of Dec. Also the MI changes affected condos mostly0 you can only get MI if you have 85%or less combined loan to value. If you can you should see if the seller is willing to carry a second for you. Do you fist loan to 80% with a seller financed 2nd. There are no lenders out there at all that will do a second loan past 80% CLTV- so since you can’t do one loan to 90% as there is no MI company to cover you…you either have to et the seller to drop their price so you have enough to get to 15% down or have them carry a second for you for the 10%. Otherwise it’s not gonna get done. Also- you nee to close in the next week or you will lose the ability to get the 666K first loan and you’ll max out at 625K.
feel free to contact me if you want more info. It sounds like you haven’t had the best of mortgage brokers yet. Wish you would have found me earlier.
Good luck with things! I hope it works out.