Condos, short for Condominiums, are perfect for those who don't mind neighbors, want an affordable mortgage, and low maintenance. In this market, however, it is getting tough to find a good deal and it is necessary to cover some groundwork before you start looking. Here are some pitfalls I commonly see that prevent buyers from getting a good deal:
1. They don't get pre-approved first.
The easiest type of loan to get is an FHA loan. It only requires a 580 credit score, and a minimal 3.5% down that can be covered with down payment assistance programs for First Time Home Buyers. The problem is condo associations, which govern the care and maintenance of the condo community, must apply to HUD to allow buyers to purchase within that community with an FHA loan. It's a lengthy and expensive process that some communities either can't afford, or don't want to bother with. They also may be ineligible because of high mortgage delinquency rates or nonpayment of condo fees.
FHA approved condos are few and far between, especially in Prince George's, Anne Arundel and Baltimore Counties where I see the most requests for this type of housing. A quick way to check if the condo is FHA eligible? Go directly to the HUD site HERE and type in the city or condo name. If it says expired, it means they are no longer eligible but we're at one time. It doesn't guarantee the condo project will be re-applying.
My suggestion? If you are sure a Condo is for you, right off the bat ask your lender for Conventional Loan approval. You won't need to pay PMI, the interest rate will be slightly higher, but there may be 3% down programs available with down payment assistance as well.
2. The condo fees are way too high.
Most FHA approved condos in Maryland are very competitive. Sellers know what they have and charge accordingly. If the price on the condo is below $150,000 in this market for at least 2 bedrooms, check that condo fee. I am seeing fees as high as $600-750 per month in addition to the mortgage (utilities sometimes included). $350 per month and under is more average, and that typically does not include utilities. Remember this is in addition to your monthly mortgage payment. Plan accordingly!
3. Trust your neighbors.
The way condo associations are designed, fees are typically not fixed. If most of your neighbors are not paying their condo fees, the burden tends to be split upon those who are paying. That can make it tough to both afford your home or try to sell in the future. Also keep in mind you are in very close proximity the to other people. Some styles are similar to apartment style living with neighbors above and below you, and on either side. Sometimes parking spaces are not assigned, or neighbors can make loud noises at night. It all comes with the package. I suggest trying to converse with some of the neighbors when you are out looking!
4. Mediocre resale value.
The way condos hold their value tend to be more in the investment category then resale. Don't expect to own a condo for five years or less and make money off of it (aim toward breaking even). Instead consider renting it out and keeping it as a investment property. Right now the rental market is hot hot hot! You should be able to make some extra money in rental income every month.
Keep the above points in mind while you are preparing to purchase a Condo in this market, but remember that YOU OWN the space within your four walls. This is a great way to break in to homeownership for first time home buyers, single buyers, those who don't want to worry about maintenance, retired buyers, and families that are just starting out and don't need a ton of space or land. To get started or to discuss your needs, call me today. I'm here to help, and I can assist you in finding property within the State of Maryland.
Dunkirk MD Homes for Sale - Genna Fleming, REALTOR® at EXIT 1 STOP REALTY
You now have free access to my Real Estate Search Engine! I am your local real estate expert with the knowledge and experience to deliver the unsurpassed service you deserve. Local Specialties: Upper Marlboro, Lanham, Lothian, Edgewater, Annapolis, & Dunkirk. Call Genna Fleming at (443) 532-8917 or follow my real estate adventures on Instagram @realestateaskgenna