Danny Salas

Unpermitted Room Additions, Garage or Porch Conversions

Conforming & FHA Allowed

In the past, if you had an unpermitted addition on your property we would have to remove the unpermitted area from the GLA (gross living area) square footage and also price the loan on a Standard 30 Year Fixed Rate Loan, or a government sponsored FHA Loan, with a significant additional cost.  Well, now, Access Real Estate Lending, through one of our wholesale partners, is able to leave the square footage in the GLA and also keep our best interest rate pricing!!

 Single Family Properties with unpermitted room additions are acceptable as described below.

All of the following must apply:

• The appraiser must comment that the addition or conversion was completed in a workmanlike manner and that there is not any impairment to the soundness, structural integrity or livability of the property.
• The room addition must conform to the rest of the property.
• The addition or garage conversion cannot cause the subject property to be in violation of zoning.  The appraisal must indicate that the zoning is legal and may not include any comments that the zoning of the property has been jeopardized. 

• The square footage of the addition may be included in the appraised value.  A garage or porch conversion may be appraised as originally intended or as currently used, depending on the comparable sales.  Example:  If garage conversions are typical for the area as evidenced by comps, the conversion may be appraised as it is currently used.  If garage conversions are not typical for the area the conversion should be appraised as a garage.
• The hazard insurance policy must clearly show that the entire square footage of the subject property, including the unpermitted addition, is included in the policy. 

Examples

Room Addition Example:  If the property was a 3 bedroom property and another bedroom has been added and the property is being appraised as a 4 bedroom property, the hazard insurance policy must clearly insure the total square footage of all living space, including the addition.

Garage Conversion Examples:  If the property is being appraised with the garage conversion being valued as a bedroom, the hazard insurance policy must clearly insure the total square footage of all living space. 

If the garage conversion is being valued as a garage, then the hazard insurance policy need only insure the area as a garage.

NOTE:  The hazard insurance policy does not need to indicate that there is an unpermitted addition or garage conversion, but the square footage that we are lending on must be covered by the policy.

 NOTES FOR GARAGE CONVERSIONS: 

Zoning:  Local ordinances and/or municipality requirements may obligate a property to have covered garage storage.  This is more common in PUDs and gated communities.  It is the responsibility of the appraiser to check for this type of requirement; however, it is the underwriter’s responsibility to thoroughly review the appraisal to ensure the property’s zoning is compliant. 

 Ineligible Scenarios

The following scenarios are not eligible under any circumstance:

• Room additions are not eligible on 2-4 unit properties.  All properties must be single family properties and the addition may not result in the property converting to a multi-unit property, etc.
• Additions that result in extra living units, also known as accessory units or granny flats, etc. are not eligible.   

Related Must Reads

FHA-Why It’s King

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FHA Mortgage Insurance Premium

New FHA Announcement

Beginning October 4, 2010, FHA is requiring FHA Mortgage Insurance Premiums on all loans with case numbers assigned on or after this date, per HUD Mortgagee Letter 2010-28.

The Changes

FHA will decrease the Up Front Mortgage Insurance Premium (UFMIP) from 2.25 to 1.00 percent while ALSO increasing the monthly Mortgage Insurance Premium (MIP) from .55 up to .90 percent.

 

 

 

 

 

What This Means

For the most refinancing FHA homeowners and home buyers, this MIP change is neutral— just different.  To carry each month, loans will COST MORE; However, procuring will be LESS COSTLY. It is a compromise that should help steady and recapitalize the government group.

Contact Access Real Estate Lending today to see if a FHA Streamline Refinance will work for you!

*Change to FHA MORTGAGE Insurance Premiums was originally to change September 7, 2010.

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Chico, CA Interest Rates Market Report – Economic Influences – April 8, 2010

Greece's Financial Problems Benefiting US Treasuries...AGAIN

Treasury Auctions “Bid” Well

The Treasury Department conducted its $21 Billion 10-Year Note Auction, yesterday, and the results were surprisingly positive.  Just like your credit risk score, think of it this way; the world is looking at the United States’ “credit risk score,” (FICO Score) and if the world thinks that the US FICO Score is below 740, than interest rates will be higher…So, that’s why it’s so surprising that the auctions have gone well this week. What’s helped?  Greece!  As the market prepares for Greece’s financial woes, again, money pours out of Stocks and back into safe-havens, like U.S. Treasuries.  I’ll take it!

Uncle Sam’s FICO Score

So, why would you expect the United States to have such a low FICO Score?  Think of this:  The US is borrowing and spending like never before.  And there is no exit strategy, or plan, to reduce this spending, or huge deficit.  So, that’s why it’s so curious, as to why the world is interested in our notes.  We’re a big risk…however, when looking at Europe, they seem more of a risk, at times…so, makes sense that money would pour into the safe-haven of U.S. Treasuries.

FHA Apps On The Rise

The Mortgage Bankers of America released the mortgage application index for the week ended April 2, 2010, earlier this morning. They said demand for home purchases squirmed out a 0.2% gain for the period while refinance applications plummeted 16.9%. According to the MBA nearly half of all applications to buy homes were for government loans – the highest share since February 1990.

Fed Minutes Results

Inflation seems to be less of a concern, recently.  According to the Federal Open Market Committee’s Minutes, from their latest meeting, “at the current juncture, the risks to an early start to policy tightening exceed those associated with a later start.”  So, keeping rates low, for the time being, is where the Fed wants to stay.  That’s great news for our current interest rate status, however, managing that risk is, well…risky…as inflation is out there somewhere…and rates will have to increase to manage those inflationary risks…when to pull that trigger, is the position that I’m glad Good ‘Ole Ben Bernanke holds, as opposed to me!

Alan Greenspan Speaks

Our former Fearless Fed Policy Chairman, Alan Greenspan, spoke with The Financial Crisis Inquiry Commission on Capital Hill, indicating that the latest credit crisis is, “the most virulent global financial crisis, ever,” and he’s suggesting that more regulation be in place, in the future, so that nothing like this ever happens again.  Smart!  Always liked Greenspan!

Jobless Claims Increase

The weekly Jobless Claims numbers rose 18,000 to 460,000.  435,000 claims were expected.  This brings me to the fact the Fed indicated, in their minutes, that, “Activity in the Housing Sector appears to have flattened out in recent months…”  My point, here, is that housing will continue to suffer, until the job sector gets better.  Continuing Claims moved lower to 4.6 Million, however, keep in mind that the Emergency Unemployment Benefactors are increasing to a current number of 5.6 Million.  So, 10.2 Million people are receiving some sort of unemployment compensation.  So, lower interest rates isn’t exactly the best solution to moving property…the employment situation is!

Up, Up and Away In My Beautiful U.S. Treasury Security

Locking Advice

Floating into the day makes total sense.  The gettin’s good, again.  While Greece and Europe suffer, our interest rates benefit.  So, we’ll float, for now.

Related Must Reads

Greece’s Financial Woes…When It Started
Type “Greece” into the “Search Site” Engine Above…to Follow What’s Been Happening in Greece

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Freddie Mac Event A HUGE Success

Over 100 Real Estate Agents poured into The Big Room, at Sierra Nevada Brewing Company, to listen and learn from one of the nations largest purchaser of real estate loans; Freddie Mac’s, Governing Board Member, Scott St. John.  Sponsored by Access Real Estate Lending, the event lured participants from Red Bluff, Orland, Willows, Chico, Paradise, and as far away as Roseville, California.  Sr. Partner of Access, Daniel C. Salas, said, “It’s a real pleasure to have Scott St. John, here, to educate the real estate agents in our area.  With the exception of the Federal Open Market Committee Members, you don’t get much bigger than this!”

St. John discussed the reason banks are having more difficulty closing loans, these days.  He also talked about reasons why banks are slowly releasing their foreclosure inventory, as opposed to releasing it all at once.  Another key subject he talked about was where the lending and real estate industry is expected to go, through the remainder of 2010 and even into 2011.

Some of the positive points, brought up by St. John, were that even though the United States Government would stop buying Mortgage-Backed Securities, at the end of March, Freddie Mac felt as though there were many investors, sitting on the sideline, waiting to get into the market, and purchase these investments.  Therefore, even though rates are expected to move upwardly, resulting from this buying halt, it shouldn’t be too worrisome; as these investors haven’t been on the sidelines for years, and now we’re seeing them start to sit on the sidelines.  Another positive point was that Mortgage Insurance Companies are starting to become more flexible with their underwriting guidelines, and even have relaxed their loan amounts, compared to real estate prices, in Santa Cruz County.  This could just be a precursor to the rest of California.  ”It’s been difficult to obtain conventional financing with less than 10% Down (excluding FHA loans), until this recent development, in Santa Cruz.  It’s quite promising,” stated Salas.

St. John noted the lending industry saw about $3.5 Billion in loans, in 2009, while the industry expects anywhere from $1.3 – $1.6 Billion for 2010.  Eighty percent of these loans will be first-time home buyers.  ”What’s interesting about the eighty percent figure,” stated Salas, “is that seventy percent, of that eighty percent, is categorized as ‘first-time home buyers,’ because the industry’s definition of ‘first-time’ is somebody who hasn’t owned a home in the last three years.  So, people who owned a home, then lost it during the mortgage credit crisis, will be eligible to purchase another home, with only 3.5% down (FHA).  It’s an interesting situation, as these buyers were of the old-style qualification standards, and they’ll have to be ready to understand that loan qualifications have changed.  But, we’re ready to educate them.”

Scott St. John indicated, “financing a home, using FHA, will become more difficult, unless using a HUD Approved FHA Direct Lender, like Access Real Estate Lending.”  As one of the areas premier mortgage bankers, Access has financed over $665 Million in loans, in just ten short years.  ”We’re excited about the future, about the Chico Market, and that Scott St. John would come to our wonderful community, enjoy Sierra Nevada Brewing Company’s Big Room, and say such wonderful compliments about Access Real Estate Lending.  We’re quite honored.”