Buying a condo is a relatively affordable, low-maintenance
alternative to the traditional single-family home. And – as with all major investments – there are a few key issues to understand before taking the plunge.
One of the most important issues is determining whether the condominium project itself is eligible for conventional fixed-rate financing. The answers to the following questions, which are part of a standard questionnaire required by most lenders, will help make that determination. But in reality, they are questions you should consider for your own good as you make the investment in a project:
- Is the project finished or are there more planned phases?
- If unfinished, how financially strong is the developer?
- Are the majority of the units sold or are some vacant and/or rented?
- Are the unit owners in control of the Condo Association?
- Do sufficient reserves exist to cover future maintenance costs?
- Are other owners keeping up with their condominium dues?
- An established, well-sold project with the majority of units occupied by the unit owners will stand a much better chance of qualifying for long-term, fixed-rate financing.
- How many units in the project are rented? Condo associations will sometimes allow condo owners to rent out their units because they cannot sell them due to poor market and/or lending conditions. Owning a condo that is neighbored by several rental units may negatively affect the average condo unit value.
- Are there any issues with the building construction and/or maintenance? Not all
builders or buildings are created equal. A project with construction issues can be discovered by analyzing the Condo Association’s previous and current annual budgets – and the minutes to their meetings. An experienced home inspector can also help you to find any building flaws that could ultimately mean higher monthly dues and/or large, unexpected special assessments.
- Other considerations: What do the covenants, bylaws and restrictions allow you to do/not do with the unit? What maintenance do the assessments cover/not cover? How many special assessments have been levied in the past few years, and what were they for?
Great Midwest Bank offers fixed rate financing for qualified projects and may be able to offer a Portfolio product for those that do not otherwise qualify for secondary market fixed rate products.
Owning a condominium is definitely the right move for some buyers. But the purchase process requires more homework for you and your lender.
Posted by John Schroder NMLS ID #967896