Sue Fox, @Properties. Direct 773.816.1788

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The return of the 3% down loan

filed under: Buyers, FHA loans, First-time buyers, Lakeview, Market conditions, Mortgage Rates posted on March 15th, 2011

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A RARE STAMP OF APPROVAL: This is one of the few FHA-approved condo buildings in all of Lakeview. Located at 1048 W Byron, it just had a garden unit priced at $180,000 (a short sale) go under contract. The vast majority of Chicago condos, however, are not FHA-approved.

Good news for Chicago home buyers: Lenders are finally starting again to offer loans with minimal down payments. Guaranteed Rate, for example, announced this week that it can now do conventional loans (not FHA!) with 3% down, provided the borrower has a credit score of 680 or higher.

This is especially good news for condo buyers, who have been forced to turn to FHA in recent years for a low-down-payment loan… but in Chicago, FHA and condos are often a lousy fit.

The trouble is, many first-time buyers can’t scrape up much cash to buy their first home. Ever since the real estate downturn led lenders to dramatically tighten the purse-strings in 2008, many buyers have been told to come up with at least 10% down. For hundreds of thousands of people, the only alternative was to use an FHA loan, which requires just 3.5% down.

This was all (usually) well and good if you were buying a house. But many first-time buyers in Chicago want a condo, and the vast majority of Chicago condos are NOT currently FHA-approved. Making matters worse, the FHA changed its rules last year to make it even more cumbersome to get condo buildings approved.

But now, buyers with good credit can avoid the whole FHA bottleneck and choose whatever condo they like — and still only put 3% down. This is great news for sellers, too, since it will smooth the path for buyers who may be interested in their homes.

Written by Sue Fox //

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