Purchasing a condominium, like buying any real estate, involves a cash investment. The quantity of money you want to finalize a purchase contract is dependent upon several factors, all based on the agreed upon price of the condominium. Furthermore, some condominium communities call for a minimum down payment be made to be able to receive condo acceptance and close to the deal. Condominiums are a fantastic investment as a buyer, particularly in a marketplace that is starting to feel a turnaround, since they are generally less expensive than a single-family dwelling.
Down Payment
If you are financing the condominium buy and getting a traditional loan, then estimate your down payment to be at least 20 percent of the purchase price, based on your credit rating. When the homeowners association (HOA) has been approved by the Federal Housing Administration (FHA) to get a government-backed loan, the minimum down payment required is 3.5 percent and a credit score of at least 620.
Condominium Community Minimums
As a consequence of several brief sales and foreclosures, several condominium communities have already put their minimum down payment conditions to dissuade investors who buy with little if any cash down. Check with the community you are considering and ask if they have established minimums.
Inspections
One of your contract contingencies is the house inspection, which provides you a review of the state of the structure, its systems and appliances. This is an out-of-pocket expense but value the fee a certified home inspector fees to inspect the condominium in addition to the common areas.
Escrow and Title Fees
Depending on your neighborhood, escrow and title costs are part of your final costs. As a buyer, you should estimate your part of the closing costs to be about 3 percent of the purchase price. Some lenders who own properties as a result of a foreclosure will agree to pay closing costs up to 3 percent in case you make an offer near full-price.
Loan Fees
Mortgage loan rates for condominiums are usually greater compared to single-family homes. Shop around and find a lender who works with condominium communities. When applying for a mortgage loan, whether it’s a conventional or FHA loan, loan and record fees are added to your final costs. The lender also sends its own appraiser to evaluate the property, and you’re charged for that appraisal.
Back-Up Funding
In order to get a mortgage, then you’re expected to have several months of expenses available in your bank account to cover emergency conditions. The cash you’re applying for the down payment must be “seasoned,” meaning it’s been in your account for over two months.
Condo Fees
Some condominium communities need new residents to pay a few months of HOA dues in advance, as assurance of the new owner’s fiduciary responsibility. You’ll also pay a charge to be interviewed with the HOA board before being approved or rejected as an HOA member.