Buying A Condo With No Money Down

Buying A Condo With No Money Down – If you’ve never bought a condo – usually shortened to just a condo – you may be surprised by all the different questions you need to consider. Buying an apartment is not the same as buying a house. You will likely have adjoining walls with your neighbors, as well as other physical elements that differ from a detached house.

In addition, the entire process you have to go through to make your decision and get a mortgage can also vary significantly.

Buying A Condo With No Money Down

Buying A Condo With No Money Down

One of the first things you need to ask yourself is “Are you the apartment type?” And what exactly does that mean? Being a city dweller, for one. Many apartments are located in urban environments. Apartments are popping up downtown, and some are even building amenities right into the development, including grocery stores, bank offices and other businesses. With that convenience can come more noise and congestion.

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If you are considering a particular location for a potential condo purchase, check the area at different times of the day and night to see how loud or brightly lit it is. If noise or light is an issue for you, this may not be the right choice.

One of the things that comes with condominium ownership is the Homeowners Association (HOA). It contains a statement of covenants, conditions and restrictions (CC&R) that states things that you, the owner of the apartment, must follow in order to live there. If you find that you won’t be able to follow the CC&Rs, apartment living may not be for you. Failure to comply could mean you could be fined, forced to comply or even sued.

Condos may be an appropriate choice for a certain type of person, such as a first-time homeowner who cannot afford a more expensive single-family home. Condos also offer the advantage of low maintenance. This can be an attractive feature for older people looking for a smaller home to physically manage. Apartments can also be an attractive choice for those who want to be centrally located in a big city.

Buying an apartment can be more difficult than buying a house. Lenders are very cautious when issuing loans for this type of home. They usually require that a certain percentage of the units have people living in them, or are, as they call it, “owned.”

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Another limitation may be how many apartments an investor can own. Typically, lenders do not want one person to own more than 10% of the units in a building. Many times lenders will also have rules regarding the occupancy of the building. Some lenders require at least 90% of the units to be sold before offering any financing.

Discrimination in mortgage lending is illegal. If you believe you have been discriminated against because of your race, religion, gender, marital status, use of public assistance, national origin, disability or age, there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau or the U.S. Institute for Housing and Urban Development (HUD).

Lenders may also have tougher loan-to-value ratios (LTVs) and restrictions on those buying flats. An LTV ratio is how much the apartment is worth compared to how much you owe on it. For example, if you put 20% down on a home, your LTV will be 80%.

Buying A Condo With No Money Down

Federal Housing Administration (FHA)-backed home equity loans are available for up to 30 years; they are known as Section 234(c) loans. Although the conditions for borrowers are similar to home loans, the restrictions on the apartments are many; the building must initially have at least five units.

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There may be other costs associated with owning an apartment. Although the HOA offers insurance, you may also need additional homeowner coverage. Carefully read all documentation to ensure that the insurance offered by the HOA does not shift the risk to you in order to maintain lower premiums.

Also remember that you have to pay a monthly condominium fee. All owners of an apartment complex pay fees to cover ongoing maintenance and repairs of the common areas in the complex. The fees typically cover maintenance of areas such as lobbies, elevators, pools, lounges, parking lots and the grounds of the complex. Some funds may be held in reserve to pay for major repairs, such as replacing the roof or exterior paint. Condo fees vary widely depending on the size of the complex and the amenities offered.

One of the most important things you can do to protect yourself when buying a condo is to research the HOA and attend an HOA meeting. You can also have a chat with the neighbors to see if they are happy with how the apartment is maintained. Review the bylaws to determine what is covered by the HOA. You can also ask to receive minutes from recent board and membership meetings and find out how much HOA fees have increased in recent years.

Another area that needs to be researched is the board’s process history, both for taxes and other general matters. You may find that there are lawsuits going on that you may not want to be a part of if you buy. Some condo associations have been forced into bankruptcy for unpaid HOA fees. If they fall behind on receiving fees, lenders may also stop offering financing on the units, which can affect resale values.

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Review accounting for delays and reserve funds. A good association should have at least 25% of gross income in reserve for emergencies and repairs. If they run out of money, you could be hit with an assessment. Also, be sure to check the latest property taxes. If the sale price of your apartment is low, but the tax assessment is high, you can expect a higher tax than you expected. Make sure the taxes are in line with the fair value of the property.

Condos can be a good investment for the right buyer in the right place when times are tough, although they can be more difficult to buy and sell than a villa. Before buying a condo, be sure to do your due diligence and check the HOA, CC&R, and any tax and insurance situations.

Also make sure you get a real estate agent and loan officer who has extensive experience in home sales, because the issues surrounding such a purchase are not as simple as those with a traditional single-family home.

Buying A Condo With No Money Down

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Zach Wichter is a former mortgage reporter at He previously worked on the Business desk at The New York Times, where he won a Loeb Award for Breaking News and covered…

Suzanne De Vita is mortgage editor for , focusing on mortgage and real estate topics for home buyers, homeowners, investors and tenants.

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Jeffrey L. Beal, CEO of Real Estate Solutions, has 40 years of experience in multiple phases of the real estate industry.

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Buying A Condo With No Money Down

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