As a Chicago-area Mortgage Lender, I never try to
influence a Buyer as to the type of property they should or should not buy. That's their personal choice ... and not my place.
But as their Mortgage Lender and Advisor, I DO try to educate them regarding different property types and the pros and cons associated with each as it pertains to their upcoming mortgage process. Why?
Because there are some fundamental differences in how differing property types flow through that process. There can also be some differences in costs incurred while moving forward, as well.
When I talk of "differing property types", what exactly do I mean? Here's my simple explanations:
- Single-Family Residence Detached: No common walls ... a free-standing House
- Single-Family Residence Attached: Examples of this classification are Duplexes and Townhomes with no Associations
- PUD: Planned Unit Development. Can be either of the above classifications (Single-Family Detached or Attached) IF there is a formal recorded Homeowners Association which charges and collects Dues
- Condominium: An Association is in place, the LAND is commonly-owned, the Unit Owner does NOT own the land (only the Unit itself)
Please Note: I didn't include "Townhome or Townhouse" in the above. Townhomes/Townhouses are NOT a property classification, rather only a "design or style" of residence.
Perhaps it's the former Residential Appraiser in me, but the buying public and their representatives need to know the impacts of the type of property (legal ownership) being considered for purchase. The fact of the matter is, the classification of property (remember the definitions above) have a "preferred pecking order" in the eyes of mortgage lenders.
What is the implied pecking order? The "ideal" collateral for a Lender is the Single-Family Residence, Detached, with NO Association involved.
Why? With this type of property, there are the least amount of rules and restrictions to address during processing. Typically, there's also fewer (and fewer ways) for issues to arise during mortgage processing.
The Automated Underwriting Models utilized by Lenders assesses the layer of risk involved with the specific property type being purchased by a Borrower. Automated Underwriting also assesses the likelihood or potential for default on a loan.
In other words, Buyers with identical credit, identical income, the same employment, the same down payment and assets ... but buying differing property types ... MAY reap different results when it comes to an Approval/Acceptance via Automated Underwriting.
Let me provide you an example of the extremes that can be found:
* Hoping to Buy, Refinance, or Construct a home in New Lenox, another Lincoln-Way Community, Will County, or elsewhere in the Chicago-area? Contact me! I'll put my 37 years of Mortgage experience hard to work on your behalf.
I can be easily found at:
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