It is possible to be surprised by all the issues that you should consider if you have never purchased a condominium. It is very different from buying a home. There will likely be adjoining walls and other physical elements in your condo that differ from a detached home.
The entire process of making your decision and obtaining a mortgage could also be different.
Who Should Own a Condo
Do you consider yourself a condo-dweller?. You are a city-dweller. Many condos are found in urban settings. Urban centers are seeing a rise in condos. Some developers are adding conveniences to the development such as grocery stores and banks branches. There may be more noise and congestion with this convenience.
To determine the brightness and noise level of a location that you might consider buying a condo, take a look at it at various times of day and night. This might not be the right place for you if you are sensitive to noise and light.
The Homeowners Association (HOA) is one of the benefits of condo ownership. It is a declaration that outlines all covenants, conditions, and restrictions (CC&Rs), that you as a condo owner must adhere to live there. If you don’t agree with the CC&Rs, condo living might not be for your liking. Non-compliance can lead to you being fined, forced into compliance, or even sued.
Condos are a good choice for some people, such as a first-time homebuyer who cannot afford a larger single-family house. The low-maintenance benefit of condos is also available. This feature can appeal to seniors who want a less complicated home to manage. For those who want to be in the heart of a major city, condos are a good option.
It may be more difficult to purchase a condo than a house. Lenders will be very cautious when granting loans for this type. They often ask that certain units have at least one person living in them or are ” owner-occupied”.
Another limit is how many condos can be owned at once investor. Most lenders won’t allow more than 10% ownership of a building. 2 Before granting financing, some lenders require that 90% of the units have been sold.
Discrimination in mortgage lending is illegal. There are steps you can take if you feel you have been discriminated against based on race, religion, or sex. A report to the Consumer Financial Protection Bureau, or the U.S. is one way to do this. Department of Housing and Urban Development.
Lenders may place additional restrictions and loan-to-value (LTV), requirements on those who buy new condos for sale in tulum mexico. LTV refers to the value of a condo versus what is owed. Your LTV ratio would be, for example, 20% down on your home. It would then be 80%.
Federal Housing Administration-backed condominium mortgages exist. They can be used for up to 30 years.
Condo ownership can have additional costs. The HOA may offer insurance but you might need to have additional homeowner’s coverage. You should carefully read all documentation to ensure that the HOA’s insurance doesn’t shift risk to your benefit. This will allow you to keep lower premiums.
Be aware that you will need to pay a monthly condominium fee. Owners of condominium complexes pay fees for ongoing maintenance and repairs to common areas. The fees cover common areas such as the lobby, elevators and pools, recreation rooms, parking lot, and grounds. A reserve fund might be set aside to pay for major repairs, such a roof replacement or exterior paint. Prices for condos vary depending on how large the complex is and what amenities are available.
Avoiding Condos With Problems
To ensure your safety when purchasing a condo, do your research on the HOA. To find out how your condo is being managed, you might also talk to neighbors. You can review the HOA bylaws to see what is covered. You can also request minutes from the recent meetings of the board and members to find out how much HOA dues increased over the years.
Another area you should research is the litigation past of the board. This includes taxes as well as other general issues. There may be lawsuits in the midst that you do not want to join if you buy. Some condo associations were forced to file bankruptcy because they failed to pay their HOA dues. Lenders could also refuse to finance units if the association falls behind in dues payments. This could have an impact on resale prices.
Check financial records for reserve funds. A good association should maintain at least 25% reserve funds for emergencies and repairs. An assessment may be issued if the association runs out of money. Be sure to review the property taxes assessments. A low condo sale price could mean a high tax bill. You should ensure that the taxes paid are fair and proportional to the true property value.
The Bottom Line
Condominiums may be a good investment if you are in the right place at the right time. However, they can be more difficult than a detached home to sell or buy. Do your due diligence on condos before you buy. Check out the HOA and CC&Rs. Also, make sure to check for any tax and insurance implications.
A loan officer with condo experience and a real estate agent is also important. These issues can be more complex than those of a single-family home.