Before Buying a Condo Be Aware of Financing Challenges
If you are considering buying a condo be aware of three issues:
- Costs are higher.
- Standards are stricter making it more difficult to get a loan.
- The Homeowners Association (HOA) fees can make it more difficult to qualify for a mortgage as they are factored into your debt-to-income (DTI) ratio by the lender.
These issues affect people who either wish to buy or refinance, and in California HOA fees can be very high.
The reason costs are higher is that lenders perceive condo's to be a riskier proposition and more difficult to sell, because it may be difficult to find a buyer who can get a mortgage on the property. Whenever a loan is perceived as being more risky lenders will mitigate that risk with higher costs.
One of the issues you will run into when trying to buy or refinance a condo is the fact that not only do you have to qualify but the condo association has to also. If the association is having financial or legal issues or a certain percentage of condo's in the complex are non-owner occupied or owned by one person the complex will be outside many, if not all, lenders guidelines.
You may find it more difficult to qualify for a a mortgage due to those often high HOA fees and nother painful part about those fees is that they are not tax deductible unlike mortgage insurance and property taxes are (at the time of writing).
Bottom line with condo's – be very cautious before buying and make sure your mortgage broker or bank does some due diligence on the condo associatin before you put in an offer.
If you need any advice regarding California residential purchase or refinance mortgages please do not hesitate to call me on (925) 951-8896