IS BUYING A CONDO RIGHT FOR YOU?

Many people find Condominiums, or condos, represent an ideal alternative to single family homes.  City dwellers, singles, couples, seniors, and many other find condos that suit their needs and their budgets.  Many buyers who feel "priced out" of detached single family home may discover condos offer an affordable homeownership alternative.

For some buyers, a condo is a place to live for a few years before moving to a single family home.  For others, a condo can be home sweet home for a lifetime.

Although buying a condo and qualifying for a mortgage loan to purchase it may have many similarities to purchasing a single family home, there are some important differences. 

JUST WHAT IS A CONDOMINIUM?

You may have a basic understanding of what a condo is: you own you "unit" within a larger building, or community, or other condo owners.  You jointly own the exterior property and common areas with all unit owners in the building or community.  And you pay a "condo fee" that covers general repairs and maintenance to the common areas and builds up a cash reserve for future needs.  But there's more to know.  And one important thing is that condo ownership is homeownership.  As a condo owner, you'll enjoy both the benefits and the responsibilities of homeownership.  You may find homeownership provides you with tax and investment advantages.  For example, you may be able to deduct your mortgage interest if you itemize deductions on your tax return, and you may discover that, like single family detached homes, condos appreciate in value too!  Please consult your tax adviser about your individual situation.

HERE ARE SOME IMPORTANT THINGS TO KEEP IN MIND:

• Condos represent a community form of ownership
• Depending on where you live, you will likely pay local property taxes on your condo.  The property taxes on your unit are not usual part of your condo fee.
• As your lender, we will factor in the condo fee in determining how much to lend you.  If your down payment is less than 20 percent of the purchase price, you may also have to pay PMI, or private mortgage insurance, each month.
• All the "home buying basics" still apply.  Your monthly income, your credit history, and your monthly debts all help determine if you qualify for a mortgage.

QUALIFYING THE PROPERTY

We look am many of the same kinds of borrower qualifications for loans secured by condos as we do for loans secured by single family homes.  We want to know that you can repay the loan without undue hardship to you or risk of default on your mortgage.  But with condos there are also some additional factor to know.

To make sure your condo qualifies for conventional loan financing, we may evaluate the percentage of owner-occupancy, which means the ratio of owner/occupants to renters in the condo building you are interested in.

You'll want to evaluate the condo carefully before finalizing your offer.  You'll want to know:

• Are there any special assessments (such as capital improvements) that will affect your cost to own the condo, or the building's value, in the long term?
• Are there any lawsuits pending against the building or the condo association?

Remember, your're not buying a home; you're buying into a community.  Take the time to look around, to learn and to ask the right questions.

QUESTIONS TO ASK YOU REAL ESTATE PROFESSIONAL, LENDER, AND CONDO ASSOCIATION

To help you learn more about purchasing a condo, here are some questions you may wish to ask or research.  Remember, this is only a partial list, meant to help you get started.  If you don't know or don't understand, ask me, your real estate professional, or the officers of the condo's homeowners association (HOA); or do research at your local library or on the Web.

How much of a condo can I afford?   We will be looking at what your total monthly housing costs would be, taking into consideration the condo fee, property taxes, PMI (if applicable), plus the principal and interest of the mortgage itself.  One of the best ways to identify how much you can afford is to get pre-qualified before you go condo shopping.  I can help you with that.

Have the condos I'm considering appreciated over time?   Your real estate professional can probably run a "com-parables" chart to determine the values of various condo units in the community over a period of time.  You may also access public tax records to see how your local government has valued or appraised the condos your're looking at for tax assessment purposes.

What are my legal rights and obligations under the condo bylaws?   Your real estate professional should provide you with a copy of your condo bylaws and other relevant documents, and you should review these for rules about remodeling, leasing your unit, fees and penalties, parking restrictions, pet ownership and other obligations.  If you have any questions, you may wish to talk with an officer of the condo association, or a real estate attorney with experience in your area.

What are the CC&R (Covenants, Codes, and Restrictions) for this condo?   How are these or other condo governing documents enforced?  You need to understand your legal rights in this area.  In most cases you have a limited period to review the condo documents after your purchase contract is accepted by the seller.  Talk to your real estate professional, know your rights and, if necessary, consult your real estate attorney.

What is included in the condominium fee?   Are utilities or real estate taxes paid directly by homeowners or are they included in the condo fee?  What about on-site property management?

Is parking deeded or assigned?   Are there spaces for visitors?  How many spaces?  Can spaces be purchased?

How are officers elected to the condo board of HOA?   How frequently are elections held?  What are the qualifications to run for office?  How long to officers serve?  Are there term limits?

What kind of modifications can I make to the unit?   Is there a committee that reviews and approves changes?

Can I talk to some owners in the building?   What is it like living there: for example, are maintenance needs promptly met?  Is there much turnover?  Are there noise or other problems?

Can I see the minutes from the last association meeting?   This may help you identify the current "hot button" issues and see how they are being addressed.

What is the remaining useful life of the buildings major components?   These include the roof, the plumbing, elevators, and other major building infrastructure.  Is there a potential impact on the value of your condo?

How much is the cash reserve fund for future repairs?   Are there any pending assessments or major repair projects that exceed the repair fund at this time?  Has the HOA's accountant opined on or has the HOA obtained a study on the adequacy of the cash reserve fund?  Could a special assessment impact your ability to repay the mortgage loan?

Does the master property insurance policy cover full replacement costs?   Does the policy have a building ordinance clause to cover costs associated with bringing the building up to code in the event rebuilding is required?

Is the complex renter friendly?   If you are looking at your condo as a long term investment, you may not want any restrictions on your future ability to rent the unit.  But if you plan to make the condo your full time residence, you may prefer that owner occupancy is high, so you'll be living among property owners (like you!).  Inquire about all terms and conditions by which you can rent your unit, as there may be seasonal or other restrictions.

TIPS FOR MOVING FORWARD

First, make sure you've covered all the standard "home buying basics."  I can help advise you if you're ready to purchase a condo and help you select the mortgage product that is best for you.  If yo have credit or other issues that need to be addressed before you can buy, now is the time to address them.  Be proactive.  Visit a variety of condos and prepare your own "checklist" of what kinds of condos, services and amenities are available, and how important each service/amenity is to you. 

I have access to the best loan programs in the country!  Our Mortgage Department is second to none!  We have a variety of home financing options to assist you in making your home purchase.  We have 15, 20, 30, and 40 year fixed rate mortgages, we have interest only loans, jumbo loans, FHA loans, VA, loans, new construction loans, no money down loans, low down payment loans, we have loans that allow a family member to "gift" you the down payment, alternative lines of credit loans, first time home buyer loans, and many, many, more.  We also lend in all 50 states! 

Please email me for a professional quote or free mortgage analysis.  I will let you know what you qualify for long before your out shopping for the home of your dreams.  Remember, there is no cost to you for your analysis, it's free.  If you have any mortgage related questions, email me and I will respond to you promptly.

Thank you.