According to The Chicago Tribune, it’s going to get more expensive to buy a condo. 

Yeah, I know, I know.  That sucks, but please, don’t shoot the messenger. 

According to the article:

With many lenders already casting a wary eye on condo loans because of their default rate, Fannie Mae has upped the ante by adding a fee of .75 percent of the loan amount of a 30-year fixed mortgage, for borrowers who put down 25 percent of the purchase price or less, effective April 1.

I asked a local mortgage broker, Marc Geshekter, for a little insight into the situation.  Here’s what he had to say:

Fannie Mae and many other major institutional lenders believe that a condo purchase carries an additional layer of risk compared to an SFR and the pricing for these loans are adjusted accordingly. 

 

These new loan fees will be in addition to any other pricing overlays that are currently in place for products sold directly to Fannie Mae.  Fannie Mae is currently only purchasing loans with a balance of $625,500 and below. 

 

In a nutshell what this means for a consumer buying a new condo is the upfront cost to obtaining the purchase financing may become more expensive or these costs can be rolled up into a higher interest rate. 

 

Since many lenders have already applied additional condo pricing overlays consumers buying a condo today are already feeling the effect of higher fees or higher interest rates for these types of real estate purchases.  Since Fannie Mae is implementing the higher condo fees on April 1^st,we may see lenders also further increase the fees for obtaining condo financing in addition to what is listed on lender rate sheets today.

What does that mean for San Francisco home buyers? 

My feeling is that this is penalizing the first-time homebuyer. 

First, 10% and 15% down loans started to become scarce, and now the historically low interest rates which have resulted in a lower cost of homeownership will be offset by the increase in the condo penalty Fannie Mae will be imposing.  Sigh. 

The good news? 

These changes haven’t kicked in just yet.  If you manage to find a SF condominium you like, get the offer accepted and close the whole deal before April 1^st, you might just be able to avoid the extra fee.  If you are considering buying a condo in San Francisco, and need a little advice whether now is the right time for you, give me a holler.  I’m always happy to talk “real estate.”