Friday, May 24, 2019

New Excel Tool Shows Condo Affordability at Different HOA Levels, Down Payments, and Other Variables.

I did a recent blog post HERE with a PDF file that showed how condo affordability is impacted by different HOA fee levels, using a standard 20% down payment. 

I have created a new Excel workbook HERE, and embedded below, that builds on that earlier post:
  1. It adds a variables for mortgage insurance that allow calculations of affordability for down payment levels below 20%. (Default mortgage insurance fees shown are for FHA loans with a loan to value of 95% or more). 
  2. It includes differing fees for home insurance for a single-family property that has no HOA fees vs home insurance fees for condos. (Generally, condo home insurance is less than for comparable single-family properties since part of the HOA fee covers insurance on the common elements).
  3. It includes an additional section that shows how the Portland mortgage credit certificate (MCC) program could further increase condo affordability.  The Portland MCC program offers an annual 20% federal income tax credit of the amount of home interest paid for first time home buyers. Details on the Portland MCC program can be found HERE. The MCC can be particularly useful for median family and above households without children who have significant federal tax liability (and cannot benefit from federal child tax credits).  

Observations: [With default purchase and loan assumptions.  $269,000 sales price, 3.5% down, 4.5% interest rate, FHA mortgage insurance premiums, property tax and insurance assumptions as shown, and a 43% debt to Income limit]. 

The two person HUD 2019 100% median income in the Portland metro area is $70,320.

Without a Mortgage Credit Certificate:
IF the home purchased does NOT have a condo fee, the income required to qualify is $64,655   [But the universe of single family homes at that price point is smaller than for condos].

IF the home purchased has a $400 monthly HOA/condo fee, the income required to qualify is $75,067, 16% more than required for a single family home purchase (with NO HOA/condo fee].

WITH a Mortgage Credit Certificate
If the home purchased does NOT have a condo fee, and IF the purchaser is a first time home buyer who is otherwise eligible, the purchaser would only need an income of $59,167 to qualify if they can use a City of Portland MCC. That is 8.5% less than required if NO MCC is used. 

If the home purchased has a $400 HOA/condo fee and IF the purchaser is a first time home buyer and are otherwise eligible they would only need an income of $69,579 to qualify if they can use a City of Portland MCC (with a condo fee of $400). That is 7.3% less than required if NO MCC is used AND note that income level is below the Portland metro 2 person MFI of $70,320.

You likely will have to scroll to right to see all columns in the Excel workbook, download to avoid this issue. 

In the Excel workbook grey shaded cells are where data can be entered, other cells are protected to avoid inadvertent data entry. A second worksheet includes links to a comparison of FHA and private mortgage insurance fees, a FHA loan calculator, and the City of Portland median income and related income and rent limits.  

Portland's current 2 person MCC income limit is $87,900, substantially below the Oregon Housing Bond program limit of $97,680 for Multnomah county, even though both programs are subject to the same IRS limits. (IRS will likely soon publish new 2019 income data and this provides a new opportunity to increase the Portland MCC income limit). 

Originally created and posted on the Oregon Housing Blog

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