Cohousing-L Mailing List: FHA/FNMA/FHLMC/stateHDA approval

[biow (biow]

In response to the question about pursuing various types of
housing approval, I can only say that it's probably well 
worth it. Without this sort of approval, financing is only 
available only from a small, not-very-competitive market,
called the "portfolio" or "investor" market. FHA and stateHDA
(bond issue) property value and income limits may make either
or both inapplicable for your development. But FNMA approval
is pretty much a must. A few years from now, in hard economic
times or more strict financial system regulation, there may
not be *any* portfolio loans out there. Are you ready to provide
your own financing to a future buyer?
 
Why else is it important to be able to get loans from a highly 
competitive market? Because otherwise you will not only have
more trouble selling your home later (far fewer people will
be able to qualify for loans), but you will get screwed 
right now. Yes, that nice, friendly community bank will 
nail you to the wall, and you won't even realize how badly
you've been screwed. How do I know this? Because I've been
a loan officer and know how it's done. It's called "overage,"
and amounts to a loan officer's unilateral markup on your
loan, as some combination of greater rates or points. If 
you are on the highly competitive "conforming" or "jumbo" 
markets, you can do okay by calling around town for rates
and going with a low (but not suspiciously low) rate.
Call on the same day you intend to apply and lock in the rate, 
or else you'll get lied to (honest loan officers will simply
refuse to give you a rate). But if you're a special case,
with only one or a few portfolio lenders out there, you
are without defenses. There are a dozen ways for you to get
taken for as much as three points of "overage" without your
even knowing it happened.

Is there an FHA/FNMA requirement that you don't like? Consider
whether it's worth the cost and risk (use perhaps 5% of your
property value as an estimate) of going portfolio. Those annoying 
requirements are, for the most part, written in red [ink]
from past bad experiences. If financial instituitions and the
government won't risk their money without termite proofing, 
do you want to?

Chris Biow