What You Need To Know Before Buying A Condo – If you’ve never bought a condo—usually shortened to just an apartment—you might be surprised at all the different issues 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 home.
In addition, the entire process you have to go through to make your decision and get a mortgage can also be significantly different.
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One of the first things you need to ask yourself is, “Are you the apartment type?” and what does that mean exactly? Being a city dweller, for one. Many apartments are located in urban areas. Apartments are springing up in urban centers, and some are even building amenities right into the development, including grocery stores, bank branches and other businesses. With that convenience could come more noise and congestion.
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If you’re considering a particular location for a potential home purchase, look at the area at different times of the day to see how loud or brightly lit it is. If noise or light is a problem for you, this may not be the right choice.
One of the things that comes with apartment ownership is the Home Owners Association (HOA). It sets out a statement of covenants, conditions and restrictions (CC&Rs) that lists things that you, as the owner of the apartment, must comply with in order to live there. If you find that you won’t be able to comply with the CC&Rs, apartment living may not be for you. Failure to pay could mean you could be fined, forced to comply or even sued.
Condos may be a suitable option for a certain type of person, such as a first-time homeowner who cannot afford a more expensive single-family home. Apartments 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 someone who wants to be centrally located in a big city.
Buying an apartment can be more difficult than buying a house. Lenders are very cautious when granting loans for this type of residence. They usually require that a certain percentage of the units live in them, or be, as they call it, “owned”.
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Another limitation could be how many apartments can be owned by one investor. 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 related to the occupancy rate of the building. Some lenders require at least 90% of the units to be sold before offering financing.
Discrimination in mortgage lending is illegal. If you believe you have been discriminated against because of your race, religion, sex, 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 US Department of Housing and Urban Development (HUD).
Lenders may also have tougher lending rates and restrictions for home buyers. The LTV ratio is how much the apartment is worth versus showing how much is owed on it. For example, if you put 20% down on a home, your LTV would be 80%.
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 terms for borrowers are similar to home loans, there are many restrictions on the apartments; the building has to be at least five units, to begin with.
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There may be other costs associated with owning an apartment. Even if the HOA offers insurance, you may need to carry additional homeowners insurance as well. Carefully read all documents to make sure that the coverage offered by the HOA does not shift the risk to you in order to maintain lower premiums.
Also note that you have to pay a monthly condominium fee. All owners in a condominium pay fees to cover the maintenance and repairs of the common property within the complex. Fees typically cover maintenance of areas such as lobbies, elevators, pools, recreation rooms, parking and grounds within the complex. Some funds may be held in reserve to pay for major repairs, such as replacing the roof or painting the exterior. Apartment 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 your HOA and attend HOA meetings. You may also want to talk to the neighbors to see if they are happy with how the apartment is managed. Review the bylaws to determine what is covered by the HOA. You can also request minutes from recent board and membership meetings and find out how much the HOA’s dues have increased in recent years.
Another area for investigation is the board’s litigation, both regarding taxes and other general issues. 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 due to unpaid HOA fees. If they fall behind on fees, lenders may also stop offering financing on the units, which could affect resale value.
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Review financial reports for arrears and reserves. A good association should have at least 25% of the total income in reserve for emergencies and repairs. If they run out of money, you could end up in assessment. Also, check out recent property tax estimates. If the sale price of your home is low, but the tax assessment is high, you may be facing a higher tax bill than you expected. Make sure the taxes are in line with the real 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 single-family homes. Before buying a condo, be sure to do your due diligence and review the HOA, CC&R, and all tax and insurance conditions.
Make sure you get a real estate agent and loan officer who has a lot of experience selling condos as the issues surrounding such a purchase are not as simple as those of owning a traditional single family home.
Requires writers to use primary sources to support their work. This includes white papers, official data, original reports and interviews with industry experts. We also refer to original research from other reputable publishers where appropriate. You can learn more about the standards we follow to produce accurate and unbiased content in our Editorial Policy. Boat sales hit a 13-year high in 2020, with many prospective buyers placed on waiting lists. Did the boat bug bite you too?
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If you are a first time boat buyer, how do you know if now is a good time to buy a boat? Start by asking yourself these questions to make sure a boat is a good investment for you and your family.
Start with your intended use – and what type of boat you’re thinking of buying. Are you most interested in hunting? Wakeboard with the kids? Entertaining friends? Boats are not as universal as you might think; be sure to narrow down how you hope to enjoy the water before you seriously start looking.
Are you okay with exploring the more limited pre-owned market to get more bang for your buck? Or would you rather buy the exact boat you’re looking for, complete with a manufacturer’s warranty?
The initial purchase price is just the beginning. Experts estimate that regular maintenance is about 10% of your boat’s cost each year – and that number could be higher if your boat is older or nicer. Also consider taxes, registration, boat insurance, upgrades, safety accessories and storage fees.
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The mooring options are endless, but they come at a cost. For wet storage, consider booking a ticket, which is essentially lakeside parking. But beware: Your marina may have a waiting list. Do you have room to store your boat in your garage or on a trailer outside? And will your HOA allow it? If not, you need to investigate self-storage or dry-stack storage facilities.
Escaping to the water on a whim seems like a dreamy idea today, but is it realistic for your family, lifestyle and budget? Seriously consider how often you would use it and whether it is worth owning a boat. If you’re not sure if boat ownership is really for you, chartering might be a good option to get your feet wet.
Have you ever bought a used car sight unseen? We didn’t think so! Use the same common sense when buying a boat. We’ve outlined the questions every prospective boat owner should ask a broker or seller.
If you’ve decided on a new boat, congratulations! Whatever type of boat you’ve settled on, from an inboard ski boat to a wind powered sailboat, we can help protect your new boat and
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