How was this financed? Will it be back on market soon? (Stadium Lofts)

2

25inIrvine_IHB

New member
Well today, I did my usual Sunday morning reading of the OC Register since thats when they seem to cover the most Real Estate stuff and I fell upon this article:



<a href="http://www.ocregister.com/news/condo-deals-draw-2105614-buyers-to">Condo deals draw buyers to Stadium Lofts</a>



its from the first page of the local section. Anyways, heres the part that caught my attention:



<blockquote>"We're getting the condo we want," said Aldrich, who together with her future husband make about $75,000 a year.



So soon, the couple, who currently live with Greer's parents in Anaheim, can move into their first home. It's a 1,082-square-foot, two-bedroom, two-bath condo for about $347,000. That's about 25 percent off, or a savings of nearly $113,400, from the original price.

</blockquote>


I am guessing from the website that the one they purchased was the cheapest 2 bedroom one which is 1035 candlestick.



I'm skeptical they put 20% down, but for the sake of argument lets say they did. So put 69,400 down leaving a 277,600 mortgage on about 75k a year.



So I'll just give them 30 year fixed at 6% (this is the most conservative way I could think of doing this)



gives them a monthly payment of 1664.35

then I found <a href="http://www.stadiumloftsnow.com/forms/hoa_budget.7.11.pdf">here</a> the HOA fees are 255.66 a month



So monthly payment alone based on 30 year fixed plus HOA = $1920.01 for a couple that brings home 6250 before taxes and using <a href="http://finance.yahoo.com/calculator/career-work/pay-02">This simple thingy</a> the take home pay should be about 5k a month or so. I am not too sure about the accuracy of that thing, so please correct me if I'm wrong about the take home pay of 5k. I am guessing that would be the most they take home. So 5k vs. 1920 mortgage without taxes.



I'm trying to figure out the exact property tax numbers. I see there is an assigned special tax on top of everything (is that another word for mello roos? or is mello roos in addition to this?) of $2,343per unit. I am guessing thats annually, and I am having problems finding the exact base % for the property taxes. Perhaps someone can help me out there.





Alright, so I guess my question is does this seem like a mortgage that the lender should be doing? Do you feel this is just another bad loan that will put this place back on the market in the near future? Obviously, there are many variables like how much they put down. Hard to believe with their income and age they have much of a down payment, but it is possible. The first time I read this I couldnt believe they got approved on this by the lender. However, the website does say the preferred lender is Countrywide. Go figure. So this also make me think if they are doing this one loan. Are alot of people in the stadium lofts getting these kind of loans?



I am not really interested in the properties, but the fact the lending got approved is what interests me here.



let me know what you guys think. I'm scratching my head on this one.
 
These people can just barely make the mtg payments if they

are really frugal. Most likely you are underestimating the monthly

payment. Well, I guess a year ago, they could have bought only with

creative financing.



Nobody is making loans like that here in florida.
 
Figure the property tax base is 1.25%, and this is what the lender will use unless there are mello roos. It would take a miracle for an underwriter to use less in this market. I checked rates and they could get 6.5% 30 year fixed or 5.875% on a 3 year I/O loan with 20% down. They have to have 20% down or they will not qualify, period. I doubt that they have $0 debt, but maybe they don't have car payments and ride bikes instead. But, at that age it is highly unlikely that they do not have a car payment.



30 year fixed:



$1755 mortgage

$256 HOA

$361 taxes

$2373 total



With their income this puts them at a 38% front end ratio, and back end ratio if they really have no other debt. This loan would have to get an exception due to the front end ratio being too high.



3 year I/O



$1359 mortgage

$256 HOA

$361 taxes

$1976 total



This still puts them at a 32% front end ratio, and it would require an exception as well. I have heard FHA loans allow for higher debt ratios, <a href="http://www.fha.com/debt_to_income_ratios.cfm">but according to their website the max front end ratio is 29%</a>. So technically this couple doesn't qualify for this place unless they are putting more than 20% down, and 22 and 23 year olds do you know that have $60k or more in the bank that make $75k a year? Even if they have been living rent free with their parents it is hard to believe they have that kinda cash in the bank.
 
Even with a conservative lender I would think they have no problem getting funded as long as they have great credit. Debt ratios of 38 over 38 even now are a slam dunk with great credit. Bye the way I think these lofts are way overpriced still.
 
Thanks for the feedback guys. I figure its just another costly mistake for Countrywide. I am more worried that if they are giving these people this loan, what are they then giving to other people.



Of course, there is always the chance their parents are helping them out or something. I agree 350k for a 2 bedroom condo (thats only 1000 sq ft) is pretty crazy.
 
[quote author="hbguybill" date=1217236590]Even with a conservative lender I would think they have no problem getting funded as long as they have great credit. Debt ratios of 38 over 38 even now are a slam dunk with great credit. Bye the way I think these lofts are way overpriced still.</blockquote>


I think you are confusing front end and back end debt ratios. This is lender speak, some here don't understand it but some do, and I shouldn't assume the latter, or that you or anyone else is either of them.



Front end debt ratios are only the monthly housing costs, and back end is the total of housing costs plus credit card, car loan, student loan, and any other debt. Fannie Mae is 28% front end and 38% back end, and FHA is 29/38 as far as I know. As my post shows this couple is above the 28% front end ratio, and if they have a car payment they will certainly be over the 38% back end ratio. Back in the days of funny money, I had several loans get a refer (a refer means that the loan doesn't meet guidelines and can't be approved with the data I inputted into the e-approval software, and it would require a manual approval from an underwriter) for a Fannie Mae approval even when they had stellar credit and no debt aside from the mortgage, but they had a higher front end ratio than 28% even when their back end would be 30%. I don't know for sure since I am no longer doing loans, but if back then it was a PITA to get an approval for a high front end ratio, then I think it is safe to assume it is even more difficult today. And... that was my point, if they have any debt other than housing, then their back end ratio would be too high as well as their front end ratio. IMHO they do not qualify, especially since their front end ratio doesn't work, let alone what their back end ratio looks like.



And... regardless of whether they can get a loan or not, I agree, this place is still overpriced. Yay! I have always wanted to live above a Jamba Juice and fight the Angel game/motocross/harvest crusade etc. traffic when I just want to go home. This poor developer must feel like a moron for changing this from apartments to condos. I hope who ever it was that convinced them of this dumb idea gets a swift kick in the nuts every time they see him. It would only be fair since they are bending over and taking it in the shorts with only half being sold.
 
I was walking by these at about 2:00 a.m. Saturday morning, and I saw a bunch of people camped out to buy them. I actually stopped and talked to a few of them, and asked them why they were doing this. They said it was a good deal (on "sale"). I mentioned that these will only prove to get cheaper in the coming months/years (I did mention IHB, heh), but they seemed very oblivious and uninformed. I guess that's exactly the kind of people the sales team is hoping for! :)
 
If you offered somebody the oppourtunity to be a knifecatcher, do you think the smartest guys in the room will be the first ones to jump?



Somebody's gotta do it. The world needs knifecatchers.
 
[quote author="graphrix" date=1217225310] They have to have 20% down or they will not qualify, period.



</blockquote>


I thought there were some exceptions for first time buyers where they have to put 20% down. Is that correct? could they possibly be doing that? That would even make them seem less likely to qualify but is that an option as well?
 
Don't believe the hype!!! It's all staged. I don't even know where to start with this. These are still overpriced. For some reason these people are camping too much instead of reading the headlines. Housing is dead. They will be FBs in a couple years. I highly doubt interest only loans exist in this credit market. A 30% gift from mommy and daddy will trigger taxes. The OC Register somewhat covers this "event" because the Lofts PR hacks probably put out a press release. This isn't news. And I'm sure if the OC Register wants to continue to get ads revenue from this builder, they'll definately going to give them this level of press coverage. Maybe they even paid for this. Unreal. These things will be at least $50K lower in a year.
 
I dont think one person here has shown interest in these properties Jeff. The question is more of how these people got the financing and whether or not the shady financing that IR shows us everyday is still continuing.
 
[quote author="24inIrvine" date=1217285996][quote author="graphrix" date=1217225310] They have to have 20% down or they will not qualify, period.



</blockquote>


I thought there were some exceptions for first time buyers where they have to put 20% down. Is that correct? could they possibly be doing that? That would even make them seem less likely to qualify but is that an option as well?</blockquote>


I am not sure about any restrictions on first time home buyers having to put 20% down. It could be true for some lenders, but my friend who is a first time buyer has a loan approval with 10% down. My point was they need 20% down just to qualify on the ratios alone, not what lending guidelines are on down payments.



And... there are plenty of lenders still doing interest only financing. People need to understand that I/O financing has been around since before you born, and has never gone away nor will it ever go away. What rate the lender uses to qualify you on... well... that is a whole other story.
 
[quote author="norcaljeff" date=1217330821]A 30% gift from mommy and daddy will trigger taxes. </blockquote>


Umm..the parents would need to file a gift tax return, but there would not be any taxes to pay. There's a credit for upto a $1mil that eliminates any taxes.
 
The 12k/year per person does not trigger gift tax. The husband's parents could have given 48k without having to fillout the gift tax return. However, if they gave 30%, or over the 48k amount then a gift tax return is required to be filled out by the parents. However, no tax will be due.
 
to follow up...this email came from redfin



<a href="http://blog.redfin.com/orangecounty/2008/07/stadium_lofts_event_was_a_home_run.html#comments">Stadium Lofts ?Event? Was a Home Run</a>



and this may answer my question from the beginning:



<blockquote>Bousman said the bulk of buyers were parents helping their children buy a home or buying a place to live for their college-age youngsters.</blockquote>
 
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