Friday, January 1st, 2010
PROPERTY
BY JANE HODGES / ILLUSTRATION BY HEATHER GATLEY
Condos are often the home of choice for first-time buyers, those who want to own property but don’t want the responsibilities of a house, or urbanites who don’t mind trading space for proximity to big-city amenities. In any of these cases, a simple buying process would definitely be welcome. But as the U.S. real estate shake-up continues, the condo market is as confusing as it ever was. Follow these tips to make your search as smooth as possible.
Work with an agent specializing in condos. In some cities, entire buildings full of condos are hitting the auction block. Meanwhile, other properties are selling units but quietly marching toward fore-closure, and those with less volatility may still be out of reach because of new lender requirements. A specialist can help you navigate the changed landscape.
Get pre-approved. It’s always wise to get pre-approved by a lender or through a mortgage broker before you shop for a home, but it’s especially smart if you’re considering buying a condo. To get best-advertised mortgage rates, it’s often necessary that you put 20 percent or 25 percent down, due to the difficulty of obtaining private mortgage insurance (required when you put less than 20 percent down) for condos. On the other hand, buyers making low down payments, typically via FHA loans (which offer down payments as low as 3.5 percent), may face restrictions on which buildings they can consider. No more than 25 percent of a property’s total floor area can be used for commercial purposes, for example.
Find out about the building’s occupancy and inhabitants. If you are thinking about applying for an FHA loan, the building must be at least 50 percent occupied, and no more than 30 percent of the units can be FHA-financed. If you’re using other types of loans, there may be particular rules that vary by lending institution or loan program.
Check the homeowners’ association minutes. Condo buildings all have a homeowners’ association, or a board that makes spending decisions about the property’s maintenance and upkeep. The association collects and deploys the monthly dues you’ll pay as an occupant in the building. Find out about pending major expenses, such as litigation, remodeling or fund shortages; any of these issues might lead to a so-called assessment, or one-time fee. With this, and most aspects of the changed condo market, a little insight goes a long way.
