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Considering a Condo Mortgage? 5 Questions to Ask Before You Apply

Considering a Condo Mortgage? 5 Questions to Ask Before You Apply

Always Know the Ins and Outs Before Applying For a Condo Mortgage.

So you’ve decided to go with a condo mortgage, but have yet to pull the trigger on filling out that application sitting on your counter. What’s holding you back? This reluctancy to kick off the condo mortgage application process is likely due to the fact that you have many questions that need answering before putting pen to paper. If you do, this is OK. It’s always important to have as much information as possible before applying for any type of home loan mortgage.

A condo mortgage typically involves terms that are far different from a regular home mortgage loan. As a condo owner, you technically only own some portion of the structure you’re living in rather than the entire thing—which in turn can create unique terms and added costs that are unlike owning a home. So in an effort to educate you to all of the nuances of getting a condo mortgage, we’ve created the following list of five questions you should ask before applying:

1. Is there a condo association? What are its rules?

In most cases the condo you purchase will mean you are now part of a condo association and are thereby subject to certain rules and expectations. Elected members of a board, who are selected from you and your fellow owners, run a condo association, set new policy, and ensure that all members are adhering to the many rules and regulations.

These rules can vary, but generally dictate whether you are allowed to make improvements such as adding shrubbery, planting a garden, or putting up a fence if you like. Some condo associations have policies pertaining to pets, as well as the size of pets. Be sure you know the makeup of your prospective condo association to the best of your ability and find out the rules and regulations. If not, you could put yourself in a precarious position similar to what this New Hampshire condo owner found herself in.

2. What are the condo fees?

If you think your monthly condo mortgage payments are all you will be on the hook for, think again. Being part of a condo association means you must pay monthly condo fees—fees that are typically based off the number of units in the condo complex. The fees can also vary depending upon whether the condo complex has a professional management company, or is preparing for major repairs or lawsuits.

Condo fees don’t just cover incidentals, however. This money is typically applied to exterior maintenance of the complex: grounds maintenance, insurance, water and sewer, as well as trash pick up and snow removal. Some associations also charge owners for extraneous things that you may never use, such as pools, tennis courts or a recreation center.

3. Who oversees the property?

Since you technically will only own what’s inside of the condo, it’s important to find out who is in charge of overseeing the property surrounding your condo complex. Most condo associations, depending upon the amount of property surrounding the complex, offer a property management service that handles all outside landscaping, exterior maintenance and upkeep, etc. The last thing you want is a beautiful new condo with no one in charge of ensuring it looks pristine from the outside.

Some condo associations use self-management as way of overseeing the property. This is a far less expensive alternative, however the onus is on the association to find all of the contractors and service providers needed to complete a specific task. A professional property manager can help, but remember, their cost will likely be included in your monthly condo fees.

4. How much money is in the condo association fund?

This could be one of the most important questions you ask financially speaking. The amount of money in the reserve fund dictates whether your potential condo association has the money needed to complete major repairs–the most common of which involves roof replacements. The fund balance is a great indicator on the financial health of your potential condo association, and should be a great way to forecast whether the condo board has its ducks in a row.

If the condo fees we discussed above are super cheap, then chances are your reserve fund is lacking or is not being managed properly. Also, if the fund is lacking, this may help you learn whether some of your fellow condo owners are or have been delinquent on their condo fees. The last thing you want is to get hit with a major expense that your condo association can’t cover.

5. Is there a rental policy?

There’s a good chance you won’t always live in your condo and will move to a new home or new location, so be sure to find out whether there is a policy against renting your unit out in case you want to maintain your investment.

Also, perhaps you don’t want to live in a condo complex with a high number of renters. While there is nothing wrong with renters, these individuals often care less about the physical property and don’t possess the same pride in ownership.

As you can see, applying for and getting approved for a condo mortgage is far more convoluted than your typical home mortgage loan. There’s so much to consider that can affect your lifestyle, as well as financial well-being.

At Blue Water Mortgage, we know the right questions to ask to ensure you’re making the right decision for you and your family. Our team of professional mortgage brokers has over 150 years of combined mortgage experience in Massachusetts, New Hampshire, Maine and Connecticut. Contact us today to find out more about whether a condo mortgage is right for you.

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.