I'm buying a condo!

[tobefirst ⚽️]

I got pre-approved for a loan late last week, and so I'm now ready to go look for a place to call my own. After living with two roommates for the last year and a half, I'm ready to get out of there and have my own space.

My cousin is a real estate agent, so I plan on contacting her soon, but in the interests of keeping her work to a minimum, I'd like to do *some* of the searching on my own, before getting her involved.

So I am here, MacRumors Forum users, to ask you for your tips/suggestions/hints/advice/wisdom/knowledge regarding the condo buying process and all that stuff. I'm not sure what else to say right off, so ask questions if you want more information. Thanks for your help!

Update: I have a couple more questions I've added here. So, if you don't want to read through the entire thread, and just help with the new stuff, I've made it easy. However, feel free to comment on the rest of the questions/advice as well, if you feel so inclined. Thanks!

 

[sushi]

Here are some questions for you:

- Where are you located?

- How many floors do you want?

- What kind of construction are you looking for?

- How tall of a building do you want to live in/what floor do you want?

- Does it matter which way it faces?

- Is parking important? If so, what do you need?

- Are other amenities desired? Pool for example.

- What style are you looking for? (Floor plan design if you will.)

- What is your price range?

- Will you pay with cash? Or will you need a loan?

- If a loan:

-- How much of a DP can you make.

-- How long do you want it? 10, 15, 30 years for example.

-- What kind of interest rate? Fixed? Variable? Balloon?

Just some questions to get things started.

 

[CEAbiscuit]

I got pre-approved for a loan late last week, and so I'm now ready to go look for a place to call my own. After living with two roommates for the last year and a half, I'm ready to get out of there and have my own space.

My cousin is a real estate agent, so I plan on contacting her soon, but in the interests of keeping her work to a minimum, I'd like to do *some* of the searching on my own, before getting her involved.

So I am here, MacRumors Forum users, to ask you for your tips/suggestions/hints/advice/wisdom/knowledge regarding the condo buying process and all that stuff. I'm not sure what else to say right off, so ask questions if you want more information. Thanks for your help!

As a general rule when comparing condo properties, go for the condo with the lowest condo fee, even if it means paying more money and a larger loan. Condo fees are not tax deductable if you live in the condo (as opposed to renting)... mortgage interest is.

 

[sushi]

Also consider renting an apartment by yourself instead of purchasing a condo.

There are advantages to renting. They need to be considered for your individual situation.

Another point, is while mortgage interest is deductible on your taxes, you pay more insurance than you get back from Uncle Sam so it might not a be a good idea to have a high mortgage.

Just like cars, many times the best properties are the ones that are paid for!

 

[Koodauw]

Buy the smallest condo on the nicest block, not the nicest condo on a lesser block.

 

[sushi]

^^ Reminds me to add: Buy a condo that you can afford. Do over finance your purchase.

 

[CEAbiscuit]

Another point, is while mortgage interest is deductible on your taxes, you pay more insurance than you get back from Uncle Sam so it might not a be a good idea to have a high mortgage.

Just like cars, many times the best properties are the ones that are paid for!

You lost me here. Please explain? Are you saying having a higher mortage means higher insurance? Not neccesarily so, depending on the location. Also, you build equity when you have a mortgage (unless you are someone who buys into the "interest only " mess, which no one should). Always kick in on the principle, it's an instant savings account.

If you can buy... buy. Every financial genius out there will tell you owning property is a good way to build wealth.

 

[tobefirst ⚽️]

To answer sushi...


- Where are you located? St. Louis, MO, USA
- How many floors do you want? I'd consider either a flat or a townhome...it really doesn't make much difference to me.

- What kind of construction are you looking for? One that looks nice. I'm open to apartment-style condos or a group of townhomes. A loft downtown would be amazing...but not affordable.

- How tall of a building do you want to live in/what floor do you want?
I'd actually prefer to have a 2nd or 3rd story place. I love to leave the blinds open, but can't really do that on the first floor...at least not constantly. Most of the places around where I live are 2-3 story buildings.

- Does it matter which way it faces? In most cases, no. I don't need to face the pond with the fountain, or anything like that. I'd prefer to not face, say, an industrial plant, but for the most part, this is a non-issue, with regards to my personal preference.

- Is parking important? If so, what do you need? I've lived in apartments and such with no covered parking for the last 8 years or so, so I'm very familiar with having to de-ice my car and remove snow from it, so a garage/carport is not a necessity...although it would be very nice to have.

- Are other amenities desired? Pool for example. This is where I'm currently most conflicted. I've been to, and looked at, a place that was small on condo size (I'd only be able to get a small one bedroom vs. a regular-sized two bedroom elsewhere), but huge on amenities.

There were two pools (indoor and outdoor), a small gym, a billiards room, a 20 seat movie theatre, a massage parlor, business center, car wash, free bike rental (there's a huge trail right next to the complex)...in addition to very nice touches inside the apartment itself- granite countertops, stainless appliances, brand new carpet (I choose the color), they'll paint the walls any color I like, surround sound is already wired...

Would it be nice to have all these things? Absolutely. But I'm trying to figure out how much that is worth to me versus having a bigger place.

- What style are you looking for? (Floor plan design if you will.) I'd ideally like something open. The more open the better, except for the bathroom. I'd like that to be closed off.

- What is your price range? I think I could go as high as about $120k or so, if I found something at that price that I really liked. I'd like to stay a little below that, but I could go that high if necessary.

- Will you pay with cash? Or will you need a loan? Loan.


- If a loan:
-- How much of a DP can you make. My loan officer told me of a grant that would put down 3% for me and I'd end up getting a low interest rate as well. I can cover closing costs out of pocket, and perhaps a little bit more, but not a whole lot.

-- How long do you want it? 10, 15, 30 years for example. I'd be looking at 30 years, definitely.

-- What kind of interest rate? Fixed? Variable? Balloon? The interest rate definitely wasn't the balloon variety, and I *believe* was fixed, but I'm not entirely positive. I'll have to check again.

Just some questions to get things started. Thank you very much for the survey.

^^ Reminds me to add: Buy a condo that you can afford. Do over finance your purchase.

I'm pretty sure you mean DON'T over-finance.

Buy the smallest condo on the nicest block, not the nicest condo on a lesser block.

Thank you for the suggestion. I think that's the way I would tend to lean as well. I'd rather my few things look nice than to have a lot of things look just "okay," which follows the same principle. What does anyone else think regarding Koodauw's advice?

 

[MultiM]

The only suggestion I have is to make sure you read and understand the Condo Association Rules before making a decision. Some of these boards have delusions of Godhood and frequently overstep themselves with unreasonable rules and picky inconsequentials. If you sign an agreement before reading it, you may find yourself in disagreement with the powers-that-be and you will have no recourse because you DID agree.

Buying is best. Have fun and try not to make snap decisions. Your realtor is there to do the work for you. She may be able to negotiate a better deal, and she knows what she is looking for. It doesn't have to be difficult.

 

[tobefirst ⚽️]

The only suggestion I have is to make sure you read and understand the Condo Association Rules before making a decision. Some of these boards have delusions of Godhood and frequently overstep themselves with unreasonable rules and picky inconsequentials. If you sign an agreement before reading it, you may find yourself in disagreement with the powers-that-be and you will have no recourse because you DID agree.

Buying is best. Have fun and try not to make snap decisions. Your realtor is there to do the work for you. She may be able to negotiate a better deal, and she knows what she is looking for. It doesn't have to be difficult.

That's a very good point about the condo association rules. I'm sure I'll have a TON of paperwork to read through, so I'll definitely read through this one carefully. Thanks.

 

[yellow]

Please note.. a bank will pre-approve you for anything, even out of your price range. They don't really care. Either way, they own your house and will keep you paying, or will sell it to someone else. So make sure you are 100% knowledgeable on what you can afford without becoming "house-poor". Make sure you can afford to put extra money against the principle every month. The faster you can build your equity, the better off you'll be when it comes time to sell.

Remember, this is a starter home and typically you'll be out of there in 3-5 years, so getting everything you want shouldn't really be an issue. Make a list of the items you are completely inflexible on and use those as your criteria for searching for a new home. Keep the list short and realistic. Garden Tubs are nice.. but I've been in ours once in the 2 years we've lived there and it's 100% more times than my wife has been in. Guess who wanted it?

Try and be proactive and choose a home in an area you know to not be on the decline. As much as I hate to admit it, school districting DOES make a difference on how fast and what you can ask for on your selling price. Keep good schools in mind.

- Does it matter which way it faces?

I think this question was more about the cardinal directions. North-facing doesn't get as much sunlight, so is therefor colder. South-facing gets the most light during and the most light the hottest parts of the day. If you like being woken up by the sun, then a bedroom that has an east-facing window is ideal, personally, I'd rather be woken up by a hammer to the noggin. I'm sure you can work out what a western facing is all about.

 

[CEAbiscuit]

Thank you for the suggestion. I think that's the way I would tend to lean as well. I'd rather my few things look nice than to have a lot of things look just "okay," which follows the same principle. What does anyone else think regarding Koodauw's advice?

That advice is on the money. Location is very important, and if you are on a budget, it is better to have the cheapest house on the block than the most expesive. Leaves room for growth.

One thing to keppin mind - high end appliances, new arpeting and fancy window treatments are a relativley low cost compared to the overall purchase of a condo. Many builders will use "high end" appliances to lure people in and increase their margins - don't buy into it. You can do a lot of those upgrades yourself for a heck of a lot less money than their markup. Remeber. condo are generally small spaces - you are not putting on addition or anything.

 

[gauchogolfer]

I'd say that the advice here has been pretty sound. I'm also looking at condos, but unfortunately in Santa Barbara the $$$ range is a tad higher.

 

[Turkish]

There were two pools (indoor and outdoor), a small gym, a billiards room, a 20 seat movie theatre, a massage parlor, business center, car wash, free bike rental (there's a huge trail right next to the complex)...in addition to very nice touches inside the apartment itself- granite countertops, stainless appliances, brand new carpet (I choose the color), they'll paint the walls any color I like, surround sound is already wired...

We have a pool, theater, Internet Cafe, billiards room, gym, and many other little perks at our condo development.

Guess how many times we've used them?

Zip.

Visit the place in the morning, afternoon and evening - it may be quiet when you visit and noisy at a different part of the day (we visited ours in the afternoon, but it turns out when we visited in the morning, there is a brick factory that fires up very loudly in the morning).

Upper floor places are great for utility bills in the winter, but murder in the summer. I think we may have turned on our heat twice this winter. I dread what it will be like in summer (heat rises). The trade off is we never hear anyone walking above us.

Spend a day hanging out in the condo development - check out the grounds, see how well things are maintained. Ask them how quickly they clean up after snowfall, etc. How far away do you have to walk your trash out (luckily we have a trash chute), how far do you have to go to check your mail. Think of all the little things.

If you want sunlight, make sure your unit gets it. We almost picked one place, but realized it's in the shade all day. Not good - we have tons of plants.

Try to observe as much as you can.

Good luck.

 

[TheDance511]

i want a condo... =-( ..... im jsut so young though and poor lol its okay ill be gettin the cheese..good luck to the OP

 

[tobefirst ⚽️]

Very good advice all of you. Thank you very much and keep it coming. You guys have definitely thought of things that I hadn't, or placed more emphasis on things that I otherwise wouldn't have placed as much emphasis. Like I said, keep the advice coming! I appreciate it.

Please note.. a bank will pre-approve you for anything, even out of your price range. They don't really care. Either way, they own your house and will keep you paying, or will sell it to someone else. So make sure you are 100% knowledgeable on what you can afford without becoming "house-poor". Make sure you can afford to put extra money against the principle every month. The faster you can build your equity, the better off you'll be when it comes time to sell.

Very good advice, indeed. I'm aware that the bank will approve me for way more than I can afford to spend. My loan officer is very good about providing me with a "total monthly cost" which includes the mortgage payment, insurance, taxes, condo fees, and other such things that I might have missed.

I think this question was more about the cardinal directions. North-facing doesn't get as much sunlight, so is therefor colder. South-facing gets the most light during and the most light the hottest parts of the day. If you like being woken up by the sun, then a bedroom that has an east-facing window is ideal, personally, I'd rather be woken up by a hammer to the noggin. I'm sure you can work out what a western facing is all about.

Ahhh...of course! Very good point!

Spend a day hanging out in the condo development - check out the grounds, see how well things are maintained. Ask them how quickly they clean up after snowfall, etc. How far away do you have to walk your trash out (luckily we have a trash chute), how far do you have to go to check your mail. Think of all the little things.

If you want sunlight, make sure your unit gets it. We almost picked one place, but realized it's in the shade all day. Not good - we have tons of plants.

Try to observe as much as you can.

Good luck.

All good things to think about. Thank you for the help.

And, again, thank you all. Please, keep the advice coming!

 

[balticgreen]

I don't often post but this thread caught my eye. I recently purchased a condo and work in the mortgage industry. Most of the advice already given is good advice.

The comment about not buying the nicest condo on a crummy block is especially true. You can live in Buckingham Palace but who cares if it's right in the middle of the ghetto? It will be hard to resell later. There may be good deals in areas that are just beginning to turn around but it can be very risky to do this and you'll have to live through the transition as it happens around you, which isn't always pleasant.

Schools also play a big part in the general ease of selling real estate but may not play quite as big a role with a condo, especially a small condo where potential owners aren't likely to have children. I wouldn't buy a one bedroom condo, again because they're hard to resell. While you should buy what you want and can afford, you should also consider resale because almost no one buys a starter home and never trades up.

You should absolutely check out the Homeowner's Association (HOA) before you even make an offer on a condo if you're buying an existing property. If you don't have any experience with HOAs, you may be surprised at how picky they can be.

Although I don't necessarily agree with the comment about buying the condo with the cheapest HOA dues, I don't completely disagree either. The amount you pay for HOA dues is important to consider but you also need to consider what you're getting for that money. If the community has a free gym/fitness room, it very well may be cheaper to pay for that in your HOA dues than it would be to join a gym (and more convenient since it's on-site), but if you're not the workout type then you'll end up paying for a gym you never use. Same with swimming pools, tennis courts, and other amenities. Elevators aren't cheap to service and they will increase HOA dues as well but you may determine the cost is well worth it to not have to carry armfuls of groceries up several flights of stairs. Some communities include things like water and sewer in the HOA dues also so look at the whole picture when evaluating HOAs. Cheaper is not always better and more expensive doesn't always mean you're actually getting more either.

Amenities inside the condo can be tricky for some people. You have to balance what you really need with what you want and also what you can afford. Some things can be added or changed later on and some things can't. Things like flooring and appliances are very easy, although granted not necessarily cheap, to replace later. Getting a new refrigerator is literally as easy as going to an appliance store, picking one out, and having it delivered. Replacing carpet with hardwood floors requires moving furniture out of the way but otherwise is relatively easy. On the other hand, converting 1.5 baths into two full baths is significantly more difficult if not impossible. Adding a washer/dyer to a condo that doesn't already have them or at least hookups for them is also not as easy as replacing existing machines.

As far as a mortgage is concerned, you do not want an interest-only, option-ARM, or negatively amortizing loan. The difference between fixed and adjustable mortgages is not much right now so I would recommend a standard 30 year fixed. This guarantees that your payment will never go up regardless of how long you stay in the condo. So many people are in financial trouble right now because they bought with adjustable mortgages during the recent boom and now they can't afford the adjusted payments. Also, shop for a mortgage just as you are shopping for a condo because every lender is different.

Speaking of loan shopping, every time a lender pulls your credit report, an inquiry is placed on your report. Too many inquiries will damage your credit. However, all similar inquiries made during a 14 day window will "roll up" and count as a single inquiry for the purpose of your FICO score calculation so do not hesitate to apply at several lenders as long as you do them at the same time.

 

[MarkCollette]

Concrete concrete concrete.

Smaller buildings tend to be made out of wood, and taller buildings tend to be made out of concrete. Concrete is fire proof, and blocks sounds better.

 

[iRachel]

Nothing very new to add here, just reinforcing what a couple others have said:

Read the condo association rules very carefully. As mentioned above, some of these places do have very nitpicky rules.

Decide how important the amenities really are. When I was looking at places, I was attracted at first to a place that had a small gym, but was in kind of a busy area without sidewalks. I ended up picking a place that doesn't have a gym, but is located in a quieter neighborhood (with sidewalks) where I can walk, run, rollerblade, or ride my bike, which I prefer over being indoors on a treadmill anyway. Amenities are often attractive, but be honest with yourself about how often you will use them.

See if you can get a sense of the utility costs - and whether or not some of them are included in the condo fees. As someone else already said, being on the top floor is nice in the winter (I almost never have to turn my heat on), but it's murder in the summer when I have to run the AC, which is expensive - I'm lucky that there are a lot of trees on the grounds, so I get a good breeze and can keep the windows open a lot (instead of using the AC), otherwise it would be even worse.

 

[RugoseCone]

It doesn't sound like you can personally make much of a down payment so consider getting two loans. One for 80% and a second one for 20%. That way you can avoid PMI (private mortgage insurance) which can add quite a bit to your monthly payments. It added about $50 a month to my first home. You must have PMI if you have less than 20% equity in your home, but for whatever reason this is a way around it, even though you don't really have any equity. Most loan officers would be knowledgeable about doing this as it is pretty common.

I'd also highly recommend you get an inspection prior to closing. I didn't when I bought a condo several years ago and soon discovered a handful of problems that would have been pointed out by a proper inspector and then could have been used as a negotiating tool.

Take 50% of what you expect your monthly payments to be and add that to your mortgage. If it's too much to handle, it's a good chance you are looking at too expensive a property. That extra 50% is a rough estimate of what your other expenses will be (taxes, utilities, etc.).

Early on in your mortgage you should also establish a consistent amount to overpay by every month. Overpayments will help you build equity and greatly reduce the time of your loan. On a small mortgage an overpayment that amounts to a full extra payment by year's end can shave years off of your loan, saving you big money. Especially if your fortunes change and you manage to pay the loan off.

 

[tobefirst ⚽️]

It doesn't sound like you can personally make much of a down payment so consider getting two loans. One for 80% and a second one for 20%. That way you can avoid PMI (private mortgage insurance) which can add quite a bit to your monthly payments. It added about $50 a month to my first home. You must have PMI if you have less than 20% equity in your home, but for whatever reason this is a way around it, even though you don't really have any equity. Most loan officers would be knowledgeable about doing this as it is pretty common.

A friend of mine has an 80/20 loan. I'll have to ask more about it. Thanks for the heads up. You guys are really helping out a lot!

 

[balticgreen]

It doesn't sound like you can personally make much of a down payment so consider getting two loans. One for 80% and a second one for 20%. That way you can avoid PMI (private mortgage insurance) which can add quite a bit to your monthly payments. It added about $50 a month to my first home. You must have PMI if you have less than 20% equity in your home, but for whatever reason this is a way around it, even though you don't really have any equity. Most loan officers would be knowledgeable about doing this as it is pretty common.

They're called combo or piggy-back loans and you avoid PMI this way because the primary loan is only 80% and the remaining 20% is financed as an equity loan. It's the same as if you put 20% down and then immediately borrowed against that 20%. The problem is that the rate on the second loan is higher than the first loan, and is often adjustable, so you are still paying more per month than you would if you had 20% down, even ignoring the obvious difference in principle. Also, a lender may (not always but look for it) duplicate some of the closing costs because they're funding two loans instead of one.

Often the best deal is paying single-premium PMI if you do not have 20% to put down. It usually costs about 1% of the loan amount and you can pay it in cash as a closing cost or roll it into the mortgage. On a $120,000 loan, you pay an extra $1,200 at closing or finance a total of $121,200 and you're done. You only have one loan with no monthly PMI premiums and one low, fixed interest rate.

I'd also highly recommend you get an inspection prior to closing.

Absolutely get an inspection. A lender may even require it to be sure the collateral property is not going to erode its own value. If buying an existing condo, your offer should be contingent on an inspection. This means you can back out of the offer if you don't like the results of an inspection. Even new construction condos, if you end up going that route, will have a final inspection.

On a small mortgage an overpayment that amounts to a full extra payment by year's end can shave years off of your loan, saving you big money.

Typically a 30 year loan will be paid off in 22 years if you make one extra payment each year. However, that benefit is not as great if you sell the house before 22 years such as most people buying starter homes do. You're just tying up cash in a real asset and although you're paying slightly less interest, you're also reducing a tax deduction. If you have the discipline to pay extra then you also have the discipline to use your money elsewhere. Let appreciation build your equity, even if it's not a lot and doesn't build as quickly as the past few years, and make money on the side with investments. You'll come out ahead. This would be different if you were in "the house," the one you want to retire in and then you'd want to hurry up and pay it off, but that's not the case.

 

[tobefirst ⚽️]

What percent of my annual salary should I be spending on a place? I'd like to hear what you guys think. I don't have any outstanding debts aside from student loans, which are about $100 per month.

 

[MarkCollette]

What percent of my annual salary should I be spending on a place? I'd like to hear what you guys think. I don't have any outstanding debts aside from student loans, which are about $100 per month.

Banks usually only approve up to 30% of your income. And I agree, it's probably a bad idea to be on the hook for more than that.

But I'd encourage that, instead of thinking of the maximum you could afford, think instead of what place will cost the least, that you'll still be happy with.

 

[CEAbiscuit]

2 reiterate 2 points above that may have been lost in the mix:

1) If you are goin gto pay points (PMI) Pay it up front. It will save you money by year 4 and can even be rolled in to your mortage.

2) Avoid the 80/20 if you can. The rates on the 20 will usually be 2 points higher.

Addtionally: Against everyone else's advice, I say stretch a little, little bit on the mrotgage (not on the condo fee. No matter what, it's like paying rent all over again IMHO).

I regret buying a my condo at a price that I could "comfortably afford" because as my income went up, I found that if I had bought a 2 bedroom instead of a one bedroom, the relative increase in value was a lot higher. It sounds like you manage debt well, so think about it. If you have 5k in cc bills and are making the minimum payment... go within a strict budget.

I know it sounds risky, but when I hire someone I want to make sure they have a morgtage, 2 car payments a spouse and 2 kids. They always seems to work harder and always seem to make more money than anyone else!