For the RE gurus...Non-warrantable condo

[Tishabet]

Hey everyone,
So my GF and I have been looking to buy for a while, and we think we've found the perfect place. The problem is, the building has 2 commercial tenants and 2 condo tenants, qualifying it as a non-warrantable condo. My understanding is that this makes property less stable from the view of a mortgage lender and thus any mortgage percentage rates will be increased because of the non-warrantable status. That is already of concern to me, but I was wondering if there is any opinion/advice on the wisdom of buying a non-warrantable property. Most of the places we were looking at were houses, so this hadn't come up before.
Any advice or thoughts would be much appreciated! thanks!

[RANDY P]

What are the specifics? Are you putting money down?

The less down, the worse the rate becomes. Pretty much you will take a rate hit for non warrantable. Unfortunately not a whole lot can be done about that. Credit has to be pretty decent to qualify as well.

[Tishabet]

good credit (FICO around 700) and 5% down. How much of a rate hit do you think the non-warrantable status will incur? We just found out about this non-warrantable status thing this morning and the mortgage company that supplied our pre-approval says they won't do it at all.

[RANDY P]

It's gonna be on some one-off program. 4 units, 2 of which commercial is gonna be tough. It's gonna require full review by the lender, and they'll want to see everything, cc&r's the whole bit - in other words, a case by case approval.

I'd check the existing owners to see where they have their loans held at - someone has to be doing it somewhere.

Usually, count on the rate (don't quote me on this!) i haven't done the research yet) but around 1% to rate premium over conforming guidelines. It's not a set add to rate since it's basically a niche approval.

I'll do some snooping around when I get to work today.

[Tishabet]

Cool, thanks for the info Randy. The building itself is 4 stories, previously a bank. The top two floors have just been converted into 2 condos, the basement is a bar and ground floor is a bakery. So unfortunately there is no previous resident to talk to.

[RANDY P]

Wow, that sounds like a killer property.

Just got done pouring through a few scenarios, and it appears Countrywide will buy it on their subprime programs, (assuming they understand the nature of your property and about 1,000,000 other stipulations) of which with your credit rating they have killer deals. Subprime not only deals with odd credit and income scenarios, but also unique property situations - of which this qualifies. The guidelines do state that they WILL buy a non-insurable assuming a few things though.

Please note, I'm not actually licensed in MA so I don't have the state specific guidelines here. There could be a snag - I ran the scenario assuming it's in WA and got a 5% down approval, 1st 30 / Fixed @ 6.5% and HELOC 2nd @7% -

Interest only option payments on both available which will drop the payment if wanted.

The rates will be slightly higher, but it's not the end of the world, given the nature of rates today, in a few years this will look like a good deal.

Price to pay for paradise. Either way, try WWW.Countrywide.com.

Good luck!

Randy

[Tishabet]

Originally posted by RANDY P
Wow, that sounds like a killer property.

.....

The guidelines do state that they WILL buy a non-insurable assuming a few things though.


Randy

It really is killer....1500 s.f. with exclusive roof rights (also 1500 s.f.), brand new renovation with bamboo flooring, 2 fireplaces, open floor plan (essentially a loft with one small bedroom), fantastic location, has a legit old school elevator for the unit, the type with an ourside solid sliding door and inner accordian door. Has skylights throughout, granite and stainless kitchen, brand new central air, etc. totally my dream place, but I want to make sure this non-warrantable thing isn't a nightmare, can't say I had ever heard of it before this AM.

Per your quote above (and I realize your expertise is not MA specific) does non-warrantable = non-insurable?

Thanks so much for all of the info, I will definitely check out contrywide.

The stairs leading to the roof deck



The living room area including firplace



Detail of the elevator

[RANDY P]

Wow that is one nice place, and yes, I meant non- warrantable.

Good luck!

[Tishabet]

Here's an article I uncovered dealing with this exact situation:
Article
It's a bit of a rant on the part of the author, but still interesting.

We just finished speaking to a portfolio lender, who says he can get us our former mortgage rate plus a quarter....now I have to figure out how heavy to lowball considering the difficulties I will run tinto reselling......


Lots of thinking to do.

[Tishabet]

Update: We bought the place (my first, I'm 25) for a little more than 5% off the asking price. Basically, since I am the "primary wage earner" in the family, the normal mortgage companies only look at my credit for calculating what rate I can get. However, since the portfolio guy we went with for this place is not a traditional mortgage lender, he can take into account crazy things like my co-borrower's credit score, which is much better than mine. so, incredibly enough, the rate we got for the non-conforming loan on this place was actually _better_ than what I would have gotten from a traditional mortgage company.

[Tishabet]

At the far end is the elevator, the kitchen is on the left


The kitchen


The skylight in the kitchen. There's an identical one in the bathrooom.


Yours truly, writing down fireplace measurements