For many, the dream of homeownership isn’t a white picket fence with a big yard, but rather the low maintenance life of condo or townhouse living. MA condos and townhouses are usually identified by a living space owned by an individual, whereas things like hallways, laundry rooms and easements are owned by the collective group commonly known as an association.
The Mortgage Buddy wants you to Consider the Following when Shopping for a Condo or Townhouse in MA:
Cost: At first glance, the sale price of a condo can be quite attractive but there are several additional costs to consider. Because common areas can require maintenance, heat, snow removal, and landscaping, the collective group has to cover those expenses. This is commonly paid through an association or management company with a monthly fee to the unit owners. Condo & Maintenance fees vary depending on amenities. Make sure to ask your agent about specific fees and how often they have been increased.
Deeded Storage: Condos more so than townhouses are limited in space and will many times lack an attic and basement. Make sure to ask your agent if there is deeded storage and how easy it is access.
Security: Communal living means lots of different people coming in and out of your building. This means more risk and opportunity for potential crime. Ask your agent about the type of security the prospective complex has. Is there 24hr surveillance, an emergency hotline, or security?
Know the Rules: MA Condo & townhouse complexes have rules and regulations that cover everything from trash disposal to shared walls to acceptable pets. Before you make an offer to buy, make sure you have thoroughly reviewed all bylaws and don’t hesitate to consult a Mortgage Buddy approved attorney for clarification.
Examine The Budget: You will want to look at the financial health of the condominium you are considering making an offer on. If the condo association is not financially sound, the associations problems will become your problems upon purchasing in the complex. Low reserve funds, or upcoming special assessments could add substantially to your required monthly condo fee payment.
Insurance: It’s important to make sure your property is adequately protected. Most complexes have a Master Policy that will cover the complex, but it’s important to cover your individual unit and its contents. These policies are called HO-6 polices or commonly called a “studs in” policy. It covers your unit from the walls in.
Mortgage Buddy Tips to Remember
When you are looking to obtain a mortgage pre-approval letter from your lender make sure to inform them that you are considering buying a condo. Mortgage condo and townhouse underwriting guidelines vary from those of single family properties.
Approved Projects: Government FHA, VA & USDA loans require that the project be “approved” in order to be considered eligible for financing, so ask your agent or lender if your specific project is FHA or VA approved. Some lenders can approve the project as part of the loan process.
Occupancy: Ask your agent what portion of the complex is owner-occupied. This affects the project’s warrantability, which just means the lenders ability to sell the loan to Fannie Mae or Freddie Mac. Most lenders will not lend on a project that is non-warrantable. Usually a project that is less than 50% owner occupied is considered non-warrantable.
Down Payment: As with every mortgage it’s important to make sure you have secured your down payment source before you start the process. Many lenders will require a larger down payment if you are going with a conventional loan and sometime they can have higher credit score guidelines.
Condo Fees & Ins: It’s important to remember that your lender will include your monthly condo fees and your monthly HO-6 policy premium when calculating your debt to income ratio. Also note that some lenders require that you escrow your condo fees and insurance premiums, meaning that you roll them on to your mortgage payment.
