BEWARE! The Location of Property You Choose May Affect Your Loan Approval!
Posted by Paul Gonzales | Visited 1142 times, 1 so far today | Currently 1 Comment »
In a recent post I discussed how the type or character of property you select to purchase may affect your loan approval. You also need to be aware that in certain cases, the location of the property may limit, or even disqualify, the financing you were approved for. Here are some examples:
Are we there yet.....
Rural Properties
The issue here is that the more “rural” a property is with regard to location to employment and business opportunity, the smaller the resale market may be in the event the lender has to foreclose and sell the property down the road. Exactly what constitutes a property that is too rural for conventional financing is difficult to pin down and will vary from lender to lender. Just be aware that that cozy little home nestled in a private valley, adjacent to National Forest land and only an hour away from the nearest State highway may be a bit too rural for the lender you are approved with.
Second Home or Vacation Homes
A common lender guideline for defining a second home is a property that is at least 50 miles from your primary residence. Why? Simply because most people interested in buying investment property don’t want to drive 50 miles to fix a tenant’s plumbing problem on a Sunday afternoon. On the other hand, most people don’t feel like they have really gotten away from it all by driving from Escondido to Poway. The bottom line is that if the lender thinks you really intend to use the property as an investment you will need to qualify for investment financing.
Mello-Roos or Special Assessment Areas
These are neighborhoods that have special property taxes assessed against them, in addition to “standard” property taxes. Such special taxes are usually the result of bonds that have been issued by the city or local district to pay for civic improvements such as new schools, libraries, fire or police stations and other major improvements that serve the immediate area. The amount of additional tax is often not significant, perhaps $30 to $40 per year. However, some housing developments built in recent years can have hefty additional taxes or bond debt to pay. In a few cases, the total property taxes can be almost double the “standard” property taxes and can affect the amount of financing you can get, not to mention your monthly budget. Be sure to ask your real estate agent about this when focusing on a particular property.
Leased Land
Certain areas in Southern California are lands that have been leased by the original owners to builders and developers. An example are lands in the vicinity of Palm Springs, Palm Desert and Indio that belong to Native American tribes. In some cases these locations have been leased under ninety-nine year leases. The developers have built condominiums and other developments on these lands. Eventually, the land and any improvements (your condo, for example) could revert back to the original owners at the end of the lease term. Hence, lenders may be hesitant to lend on such a property. Generally speaking, you will be OK as long as the remaining term of the lease is longer than the term of the loan you are seeking. For example, if there are 65 years remaining on the underlying land-lease and you are seeking a 30-year loan, most lenders will consider such a deal.
There can be other location issues that may affect your financing options as well. Be sure to consult with your real estate or mortgage professional if you suspect that the location of a particular property might raise a lender concern.
call me for questions at (800) 775-7334 or email at paulforloans@aol.com
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