In many places, including the Portland area we are officially in a seller’s market according to real estate professionals. It’s due to the lack of inventory. If you’re in that starting out price range, getting your foot into the real estate market for the first time, unless you have a pile of money set aside, this makes it more of a challenge to find options to choose from. Buying real estate is harder than shopping for other items, like a car, where you can find the same car or close enough in many places. Housing tends to be more a one of a kind type of shopping where things don’t always stay available. This means if you fall in love with same property as 10 other people and are competing for the sale, it’s a little challenging. Someone told me recently that they went to look at a property in the large city where they live. A home that had only been on the market and open for a few hours, they fell in love with and decided to make an offer on it, only to find out there were 17 offers ahead of them! Brutal! Usually the last things to sell or where there is at least some inventory in the lower end sales prices are condominiums.
Now, who doesn’t love the idea that someone else does the yard maintenance, fixes the roof and siding and takes care of everything that could go wrong outside your home? Is it really easier to qualify for these since the price is lower? Well, the bugaboo can come in how you are qualified. We use your payment (payment, interest, taxes and insurance) plus any homeowner’s association dues. On a home, if there are any, the HOA dues are often small, like $10-$50 a month if you even have them. However, on a condo they can range from $250 to over $1000 a month. That will increase your payment ratio and somewhat diminish what you qualify for if you are on the edge of the qualification ledge. For reference, automated underwriting typically doesn’t want to see that front ratio (total payment divided by gross monthly income) be more than 36% of your income. There are exceptions, and it will treat your file for the unique picture that it is, but you will need to keep this in mind if you are looking at a condo.
The other thing to note is that if you are qualifying on a government loan like FHA or VA and not on conventional financing, the condo project needs to be FHA/VA approved. The listing agent should have this information. If you clear this hurdle, be sure to look at the condo c.c. and r.s’ (conditions, covenants and restrictions), make sure you can live with their rules. Review their financials and ask if they have had any litigation or if there is any pending litigation. Is their HOA management company bonded? There are a few horror stories out there that involve these things, though they are not the norm. It’s often that the things that remain for sale in a low inventory market are the ones with a thorn, like the house that has serious location issues because the freeway onramp was built at the end of the driveway. These issues can cause your loan to have some bumps in the process or even go sideways. A clean property in a good location that you can afford will go a long way to your enjoyment and happiness as a homeowner, no matter what type of property it is.
Enjoy the hunt! It’s always a smart idea to get pre-qualified and pre-approved so you are ready when that sweet dreamy one pops on the market and you get to be first in line.
Have helped buyers of all types and financial levels and worked on 1000's of loans.
There is always something new!
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