Monday, April 20, 2009

South Bay-Beach Cities:Mortgage Loan Changes for Townhomes/condos

Wouldn't you know it.. just as the California real estate market starts to show a few signs of stabilizing... the Feds throw a wrench in the works. Fannie and Freddie, in their infinite wisdom, have made some major Mortgage loan changes for townhome/condominium buyers who are looking at properties with loans under $729,750.

In the South Bay- Beach Cities that means entry level properties in Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo. It will hit buyers of 55+ units in Redondo, Torrance and Palos Verdes who are looking for a loan. It will affect people buying entry level ( $725,750 or less) townhomes/condominiums in all the South Bay. Want to buy a small unit as a vacation property along the Esplanade... it will cost you more. How much more depends on a number of factors.

So just what have the powers that be been doing.... The basics are that you will need higher FICO scores, you will probably need a larger down payment then you did last month unless you are looking at FHA financing. Your appraisal fee will be higher and must be paid upfront and you will be paying higher upfront fees from .75% to as much as 3% to get that government backed loan. However if you are looking for a jumbo loan on a higher priced property... say one of those spiffy townhomes with great views in Manhattan or Hermosa... then it's business as usual.

I understand the idea behind these changes is because of the numerous problems with large condo projects in other states that went down the drain. However in most of California, townhomes/condominiums are our form of affordable housing. I'm not sure how these changes will affect buyers in the South Bay as we don't have a lot of large developments.... but I expect we will soon find out. It wouldn't surprise me to see an easing of some of the new rules once the administration realizes that this may not be the best move in a housing crisis.


Anonymous said...

I'll have to say, Kaye....I don't think "affordable" loans lead to affordability. Incrementally lower interest rates lead to higher prices.

In the long run, it's a wash. I'd like to see the federal government out of the loan business. Rather see them user taxpayer money on social security or the like. Rather than pretending that by keeping interest rates lower they keep houses "affordable".

At the end of the day, people pay what they can afford. If no one can afford it, it doesn't sell.

Only thing the federal government can do is try to change the rate of adjustment.

Kaye said...

Anon 5:31,
I have to agree... affordability is linked to income and confidence. But it just doesn't make much sense for the Government to go overboard on fees when they have a bigger housing problem that needs solving.

Rates are going to have to go up as you just can't throw this much money into the economy without inflation cropping up later. To ward off inflation they are going to have to tighten up the money supply.

Anonymous said...


You really lose me when you start talking about things to which you clearly have a very limited understanding.

Kaye said...

Anon 12:22,
Sorry I lost you...

Perhaps 1979-1980 rings a few bells... high inflation led to a tightening of the money supply by the FEDs which let to interest rates of 17%.

Maybe we won't be in as much trouble but I wouldn't rule it out..

Anonymous said...

Apples and oranges

Kaye said...

Anon 3:05,
I do hope you are right

Elink said...

yeah, its all about Affordability and Confidence level for making such purchases and bold decisions.