We’ve been getting a lot of questions regarding FHA financing and our 5% down conventional program. We are one of a very few lenders that can offer 5% down conventional financing. I thought it would be a good idea to provide you with a short list of pros and cons for both loans.

FHA Pros
• Allows for higher debt to income ratios. In some cases up to 55%
• Allows for lower credit scores, down to 620
• Allows a borrower to put 3.5% down
• The entire down payment can be a gift

FHA Cons
• Condo buildings must be HUD approved.
• More documentation required from borrower

5% Conventional Pros
• Condo buildings do NOT have to be HUD approved
• Less documentation required
• No upfront mortgage insurance required

5% Conventional Cons
• Debt to income ratio must not be greater than 41%
• Down payment must come from borrowers own funds
• Must have at least a 680 FICO score

Guest blogger, Michael Poland, is a senior mortgage banker with Baird & Warner Financial Services in Baird & Warner’s Lincoln Park Office. Michael can be reached at 773.770.7524 or by email at michael.poland@bairdwarner.com.

Starting late last year and until this week condo buyers had to put a minimum of 10% down unless they bought an FHA approved condo. Condo mortgages requiring only a 5% down payment with no FHA restrictions are now available for well qualified condo buyers!

According to Baird & Warner Financial Services Loan Consultant, Michael Polera, “As of March 15th Radian Group Inc. one of the nation’s major credit risk management companies has decided to venture back into insuring low down payment condominium loans. Initially mortgage insurance for 95% condo loans will be available for only very well qualified buyers. The underwriting guidelines are conservative, requiring low debt to income ratios, high credit scores and cash reserves after closing. Also, newly constructed buildings and conversion projects will have to meet certain guidelines.”

Not only does this make buying a condo a possibility for more well qualified buyers, it gives them more choices since the condos don’t need to be FHA approved. This is also good news for sellers with condos that aren’t FHA approved since it increases the pool of potential buyers.

If you want to buy a condo and have good credit, but have been stopped by the 10% down payment requirement or FHA restrictions, contact me for more information on these new mortgages.

This year I will be recommending that my buyers perform a new test during their home inspection. While I recently visited the new condo of some of my buyers in the South Loop, they shared with me that they discovered after they moved in that their granite countertops weren’t properly sealed. Their kitchen countertops were absorbing food stains. Granite is a porous material and the pores need to be kept sealed to prevent it from absorbing stains.

My buyers did some research and discovered The Water Drop Test for checking if granite is sealed. It’s easy and only takes a few minutes. I will be recommending it from now on to all of my buyers. My South Loop buyers also found granite care products at MBStone.com that they like very much. Thank you, Kathy & Lynn, for this helpful information!

Yesterday I attended the SPARKt Technology Conference. The conference featured a dozen or so speakers on technology and real estate.

One of the speakers was Blagica Bottigliero, the founder of CondoPerks.com, which gives Chicago condo owners a place to shop online, get discounts and earn money for their condo associations. Blagica shared her story of buying a condo only to become disillusioned along with many of her condo neighbors. Assessments went up 200%, cracks appeared as the building began to settle, and other problems prompted her to send a survey to 100 of her fellow condo owners. 33% responded that they were not sure that they would buy their condo again knowing what they know now.

In her presentation Blagica shared her disappointment that the developer’s sales rep hadn’t done a better job of educating her about her purchase. One of the audience members asked if she had used a buyer agent to which Blagica replied that she hadn’t used a buyer agent!

I cannot emphasize enough that sales reps work for the sellers, not the buyers! Sales reps at condo developments aren’t required to have real estate licenses. Such reps also aren’t bound by the ethical requirements of the National Association of Realtors (NAR). I’m not saying that condo development sales reps are bad people. They’re just doing their job which is selling condos for the developer. Their job isn’t to look out for buyers and make sure they know what they are getting into.

That’s my job as a buyer agent. Email me before you even start looking for a condo in Chicago or the suburbs.

This morning’s SunTimes.com has a good article on LifeAt.com a new social networking site for high-rise dwellers. The site provides social networking within a building. Four Chicago high rises, 340 on the Park, 565 Quincy, Prairie District Lofts and 600 Lake Shore Drive are on LifeAt.com. Superior 110 will be added soon. Each building’s site doesn’t provide much information for prospective buyers since access is restricted to residents. However, if I were looking to buy a home in a high rise, a social networking site just for the building would definitely be a nice feature!

Recently I showed a 3 bedroom condo in The Chandler, a new high rise in the Loop’s Lakeshore East Development north of Millennium Park. The unit offers high end finishes including Snaidero Cabinets and marble in the master bathroom.

The condo also provides nice views from the main living area and all bedrooms. Unfortunately, the view of Lake Michigan (shown left) will be changing. Another high rise will be built on the dirt lot in the bottom of the photo.

When considering a home in an area of high rises, especially one that currently has nice views, it’s advisable to inquire about any possible new developments that might change the view. A new high rise could mean the loss of your enjoyment of a view, and would likely impact the home’s value as well.

Today I showed 3 bedroom condos in the River North, West Loop, South Loop and Loop. One of my buyers’ “must haves” is an outdoor space such as a balcony. What I’ve noticed in showing numerous condos with balconies is that the location of the balcony is often more important to buyers than the size of the balcony.

The balcony shown left is accessed from the living room of a penthouse we viewed in the South Loop this morning. The access is also close to the kitchen area minimizing the distance food needs to be carried to and from a grill on the balcony.

Unfortunately, many condos only have balcony access from bedrooms. Most of us would rather not have our friends (no matter how close) walking through our bedroom to get to the balcony. It also increases the distance food has to be carried to and from the kitchen when grilling or just eating outside which increases the chances that something will get spilled.

A lot of developers haven’t quite figured this out yet. We looked at a very nice new development in the West Loop on Monday where the developer put a tiny balcony off the dining room, but a 25 ft. balcony off the master bedroom.

When balcony location is important to my buyers, I’ve started contacting the listing agent to find out where the balcony is located before forwarding condo listings to my buyers.

Today’s Chicago Tribune Business Section has a good article on the downtown condo market titled, “Record condo numbers to saturate downtown.”

According to the article, nearly 6,000 condos are expected to come on the market this year. That compares with less than 4,800 last year.

But don’t expect lower prices. Instead developers will probably offer better upgrades.

In a related article, “Chicago home sale prices down 6%“, the Tribune reported that median metropolitan Chicago condo prices for existing units rose 7% from a year ago.

Recently, I worked with buyers who have 2 dogs. They seriously considered a new condo development in Oak Park and mentioned the dogs to the staff at the sales office who didn’t mention an issue with the dogs. Later while at an open house for a townhouse in neighboring Forest Park, they mentioned the dogs and that they had considered the new condos in Oak Park to the hosting agent. The hosting agent informed them much to their surprise that they couldn’t have more than one dog in a condo in Oak Park!

That isn’t exactly true. According to the city of Oak Park, up to 3 dogs are allowed in Oak Park townhouses and up to 2 dogs are allowed in units in 2 and 3 flats. These can be condos. However, in all other condos (including the new condos my buyers considered!) the one dog rule applies. Read “Facts About Keeping Animals in Oak Park” for the details.

On Wednesday I showed condos in the Loop to a woman from Phoenix. The first condo we looked at was a 2 bedroom 2 bath unit in the Park Millennium a high rise at 222 N. Columbus in the Loop’s New Eastside Neighborhood, just north of Millennium Park.

In the southwest corner of the building, the unit had nice partial views of Millennium Park and Michigan Ave.

The Park Millennium has amenities comparable with other buildings we looked at in the Loop. However, it definitely had the best security. The door staff held our photo IDs until we left the building! Another difference which depends on your point of view is parking. It isn’t available for purchase, so you don’t have to cough up an extra $35K to $45K to buy a space. However, you do have the ongoing monthly cost of leasing a space.