Condo Buyer Report
A first time home buyer needs to consider some basic guidelines before condo hunting and negotiating a real estate contract.
New construction versus existing
New construction condos usually go up in value quicker and they have lower association dues since the project is new and little maintenance is required. New condo projects in fast growing areas areas may offer the greatest chance for increase in value, but you need to be aware that if the area doesn't continue to develop you could see little appreciation on your condo. Existing condos usually offer greater stability in value and marketability.
Deciding on 1 bedroom versus 2?
Most first time home buyers want a 2 bedroom condo until they find out that the monthly payment is higher than anticipated for the 2 bedroom condo. A 2 bedroom can be more marketable and you can get a roommate to pay for half the mortgage but remember you can't use your roommate's rent to qualify for a loan. Also, what happens if your roommate leaves? I tell homebuyers if they are not sure what to do, go ahead and buy a 1 bedroom condo and keep it for 2-3 years and build up some equity and move up to a bigger condo, single family home, or even a multi-unit.
Owner Occupancy
Make sure if you are buying an existing condo that you ask about the owner occupancy in the building. The magic number is 50% for Fannie Mae loans which means that 50% of building owners live in the units. If the building is less than 50% owner occupied, then it may hurt your resale value. Also, buyers will have more trouble finding mortgage financing with less than 20% down in buildings under 50% owner occupied. Furthermore, you will want to use FHA or VA loan for financing then the building must be an FHA or VA approved building.Association Dues
If you want a condo in a hi-rise building with a beautiful lakefront view, you need to be aware that association dues are generally much higher for a high rise versus low rise building and they have a greater chance of a special assessment being levied against you which is a "special tax" for building improvements. Ask the management company of the building if they have enough reserves to meet future obligations such as building repairs and improvements.
Finally, you should choose a local real estate agent to help you find a good condo project. A Realtor knows the area you are looking in and they have access to all the information you need to make a decision about buying a condo in a particular building.
