Good thing first time buyers are getting that $8000 tax credit, because if you’re a first time buyer looking at condos there is some bad news headed your way on April 1. Fannie Mae & Freddie Mac, the government sponsored entities that help keep mortgage rates low for borrowers with loans less than $417,000 (now about to rise to $729K in our area thanks to the stimulus bill), has announced higher fees and tougher credit score requirements. These extra fees are supposed to counter the higher risks and losses associated with certain loans.
Condo borrowers, in particular, have been singled out: unless you have a whopping 25% downpayment, you’ll be hit with a three-quarter point add-on penalty regardless of your credit score. Buyers with a FICO score between 700 and 720 will pay an extra three-quarters of a point, too, whether on condos or not (a point = 1% of the loan amount). Below 700? Expect 1.5% in fees. Ouch.
All the more reason to look at FHA, which is less harsh about credit scores and requires just 3.5% down payment. But condo borrowers may still have a tough time: FHA does not mesh well with many condo buildings.