In buying a condo in Bryan or College Station, whether for students or singles, there are some things that you need to know to get the best deal possible. Potential issues come up for condos, typically only in the lower priced ones, but you, as a potential buyer, need to be aware and prepared for them.
Non-Warrantable Condos-one of the first things we do with a condominium purchase is to have a condo questionaire filled out. In this questionaire there are several items that can have a big impact on your purchase. These are to determine whether the property is eligable for regular warrantable loans, sold to Fannie Mae or Freddie Mac or a non-warrantable loan that is not eligable for the normal loan programs. The non warrantable properties are presumed to be a bit riskier an investment because of several factors. Most loans get called non warrantable because of a property condition. Thought there is a whole checklist that must be gone through, The most common of these is below a 60% owner-occupancy rate in the complex. The reason that lenders are affected by this is that there is a perception that owner-occupants will work harder to pay their loan than investors. If a major portion of the condo is held by investors and many default the HOA may have issues paying for the maintenance of the grounds or exterior of the units.
How does this affect you as a condo purchasor? First, don't think you will get into these condos with 3%-5% down. Non warrantable condos are best purchased by strong borrowers that have 20-25% down payments available. The interest rate is bound to be a bit higher, since it is considered a riskier loan. The normal 6.25% interest rate isn't what you will see with these units.
Are these bad investents? Not at all, just something to be considered carefully before you invest. Currently I am purchasing a one bedroom/one bath condo in Doubletree Condominiums. Rentals over there for these units are $550 a month and up. I am paying $43,500, and putting 20% down. My total payment on a 15 year fixed at 6.61% interest, with HOA fees (115.60 a month), taxes, insurance and principal and interest will run $515. In 15 years it will be paid off and the profit will be mine. Meantime the rent will go up and the return will be even better.
If you're looking for a property like this, or something a bit bigger, go to my web site at www.ChrisTesch.com.