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OK, I need help purchasing a condo. A great deal approaches?
GameHat
Registered User
Registered User
So...
I currently live in an apartment. Tiny little one bedroom thing. Still have most of my crappy college furniture. Probably about 450 sqft.
Honestly, it pretty much suits me. Right now I'm living alone and really don't have a whole lot of stuff. But with the housing market so severely depressed, I've begun looking to buy a condo or townhouse - not so much because I need a nicer place to live (though I wouldn't mind it) but as an investment of sorts. I'm not gonna try to do anything unrealistic like flip the thing in two years, but if I start building up some value - that could help me in the future.
So I'm looking at some basic 2 bedroom 1 bath condos. Some decent, some crappy. There are hundreds of properties in my area and price range (far northwest Chicago burbs). I've sort of set my comfortable upper limit at $150k. My credit is great so I'm pre-approved for this much (actually a bit more). My business manager hears of this. Says, "Hey, come look at my place. I've been moved out for over a year and I really need to sell it."
I laugh. "I know you paid like $210k for that thing (4 years ago). That's pretty far out of my range."
"Well, what is your range?"
"Maybe...I dunno, $130-150k?"
He pauses. "I'd consider that"
So he takes me to see it today. To my eyes, it's huge. About 1700 sqft, 2 bedrooms, 2 bathrooms, fireplace, wood floors. Nice place. Good neighborhood, but looks a bit empty. Needs a bit of paint but in decent condition. Empty because he's been living in Florida for the past two years (and it's been on the market at least that long). It's about 9 miles closer to work for me.
What he tells me - he still owes about $150k on the thing. Has more or less accepted it as a loss. His main home is in Florida so he's not out a living space or anything, he just wants to get out of the mortgage.
Plus he figures if he sells it to me he can drop the real estate agent and save maybe 6% on the sale.
Two other units in the development started listing at around $200k. Both are down around $170k right now.
$150k is at my self-imposed upper limit. But I'm pretty sure I could swing it. And if the thing sold 4 years ago for $210k - man, it's hard to ignore the thought that I'd be getting a steal. That of course assumes that in five years or so the housing market will have recovered.
My other concern - would it be weird moving into this huge (to my eyes) place with only a small amount of crappy college furniture? Literally: I could put everything I own just into the living room. Bed, dresser, nightstand, Kitchen Table, 4 chairs, supremely crappy couch, TV, a couple of lamps. It would probably take me years to properly furnish this place and not feel like a squatting hobo.
Plus I suspect the neighbors are bit...older and wealthier than I am. I saw a few walking their dogs and whatnot. Mostly older. Not like I'm some crazed punk, but I am still in my mid-20s.
I dunno - there's plenty of places around to buy. Most of what I've been looking at has been in the 1100 SQFT range, and would probably "fit" my stuff and demographic better. But these smaller properties are all listed at $130-$150k as well.
Any advice? On the "opportunity" or in general?
I currently live in an apartment. Tiny little one bedroom thing. Still have most of my crappy college furniture. Probably about 450 sqft.
Honestly, it pretty much suits me. Right now I'm living alone and really don't have a whole lot of stuff. But with the housing market so severely depressed, I've begun looking to buy a condo or townhouse - not so much because I need a nicer place to live (though I wouldn't mind it) but as an investment of sorts. I'm not gonna try to do anything unrealistic like flip the thing in two years, but if I start building up some value - that could help me in the future.
So I'm looking at some basic 2 bedroom 1 bath condos. Some decent, some crappy. There are hundreds of properties in my area and price range (far northwest Chicago burbs). I've sort of set my comfortable upper limit at $150k. My credit is great so I'm pre-approved for this much (actually a bit more). My business manager hears of this. Says, "Hey, come look at my place. I've been moved out for over a year and I really need to sell it."
I laugh. "I know you paid like $210k for that thing (4 years ago). That's pretty far out of my range."
"Well, what is your range?"
"Maybe...I dunno, $130-150k?"
He pauses. "I'd consider that"
So he takes me to see it today. To my eyes, it's huge. About 1700 sqft, 2 bedrooms, 2 bathrooms, fireplace, wood floors. Nice place. Good neighborhood, but looks a bit empty. Needs a bit of paint but in decent condition. Empty because he's been living in Florida for the past two years (and it's been on the market at least that long). It's about 9 miles closer to work for me.
What he tells me - he still owes about $150k on the thing. Has more or less accepted it as a loss. His main home is in Florida so he's not out a living space or anything, he just wants to get out of the mortgage.
Plus he figures if he sells it to me he can drop the real estate agent and save maybe 6% on the sale.
Two other units in the development started listing at around $200k. Both are down around $170k right now.
$150k is at my self-imposed upper limit. But I'm pretty sure I could swing it. And if the thing sold 4 years ago for $210k - man, it's hard to ignore the thought that I'd be getting a steal. That of course assumes that in five years or so the housing market will have recovered.
My other concern - would it be weird moving into this huge (to my eyes) place with only a small amount of crappy college furniture? Literally: I could put everything I own just into the living room. Bed, dresser, nightstand, Kitchen Table, 4 chairs, supremely crappy couch, TV, a couple of lamps. It would probably take me years to properly furnish this place and not feel like a squatting hobo.
Plus I suspect the neighbors are bit...older and wealthier than I am. I saw a few walking their dogs and whatnot. Mostly older. Not like I'm some crazed punk, but I am still in my mid-20s.
I dunno - there's plenty of places around to buy. Most of what I've been looking at has been in the 1100 SQFT range, and would probably "fit" my stuff and demographic better. But these smaller properties are all listed at $130-$150k as well.
Any advice? On the "opportunity" or in general?
GameHat on
Posts
If I found a place that was nice and also had older families there, I would take it in a second because you won't be having loud neighbors (and as long as you aren't a loud neighbor everyone will be happy). Nice roomy apartment with no punk kids or convicts blasting there stereo? Heck yeah.
gamertag: Canadianllama
2. If you cannot put 20-25% down, cash, you're not ready to buy. If you cannot get a standard 30-year fixed mortgage, you are not ready to buy.
3. Do not underestimate the costs of owning a house above and beyond being able to make the payment. If something breaks, it's on you. If there's an assessment in the association, it's on you. Insurance - on you. HOA and property taxes - on you. These things are not cheap. Let's say it rains and you find out you've got a roof problem. $10K right there. Let's say the little water line that goes into your refrigerator gets a leak right after you leave for the weekend. There's a couple $K and let's hope you have insurance to pay for redoing the whole thing. Hope it doesn't flood your neighbor's place, too.
Really, at this point (and almost at any point) owning a house is not an investment. At best, it's a bank with a bed.
What the fry said and more. I currently work in the banking business right now (was once the Wamu now your friendly neighborhood JPMORGANCHASEOMGHEUGEBANK) and the market is simultaneously the worst/best it could be in.
It's really bad in the sense that yes, the market has NOT hit bottom yet, especially if you're in an area (like me, good ol socal) that was one of the "epicenters" of the Sub-Prime mortgage market. This means that things could potentially get worse, and home values could decline more, leaving you in the unenviable position of owing more on a property than you paid for it. ("Up-side down" as the housing lingo often refers to it, definitely not a situation you want to be found in)
It's, on the other hand, fantastic due to the sheer glut of homes on the market, both foreclosed or otherwise that is driving prices down like a a steel ingot thrown in the ocean.
But yes, specifically focusing on Condos, here are some EXTREMELY important things to note as fry pointed out.
-First, if you do go the Condo route, immediately factor in, that whatever you figure is your mortgage payment, you'll have to tack on anywhere from 100-300$ extra per month depending on your Homeowner's Association Dues.
-Second, expanding on HOAs, before you even think about sign your life on the dotted line, make sure you investigate the "status" of the HOA itself for that property. Depending on state law, but for the most part everywhere, HOAs are required to disclose their operating accounts to their members and are required to maintain a minimum amount of money in the account in order to be considered operating legally. The fund is used to maintain the property (ie roof, plumping, electric issues etc) and they're critical to making sure you don't end up screwed when something major on the property breaks. This is a common pitfall in this market, frequently, a condo complex will have half or more of it's units foreclosed or for sale. That means a heck of a lot of dues NOT coming in. Thus, you can find yourself in a situation where you move in and suddenly things start breaking and you and everyone else who lives in the complex are suddenly footing the bill for massive repair/back tax/sewer bills because the HOA fund ran dry six months ago and the owner of the property conveniently "omitted" that little fact.
-Third, as Fry said, if you're not prepared to drop anywhere from 15-25% down for the down payment on the place, chances are you're not going to be able to secure a loan, even with spectacular credit. Trust me, I've got an 835 FICO score right now, have 2 credit cards, a car loan, never been late etc, and I STILL would have to have both of my parents co-sign with me to qualify and I'd have to go through an employee discount plan to qualify AND still have to drop at least 20% down. "Pre-Qualification" nowadays basically translates to..."well we won't deny you outright from applying, but you'll most likely not make it through the application process...sorry!"
Due to the volatility of the market, banks are scared shitless of lending money, especially to first time buyers. You may be able to quality for a Federally Insured Loan through the First-Time Buyers program that's run by Fannie Mae/Freddy Mac, which I think only requires a 3% down payment but there are tons of other stipulations that I won't go into as they would easily swallow 20 pages of real estate gobbeldy gook that even I don't fully understand.
-Finally Note that loan conditions have changed considerably in the last 8 months or so. If you decide you want to go ahead with your loan, chances are you're going to need quite a bit of documentation to bring to the bank to begin processing:
-2 years worth of income documentation. Either pay stubs or tax records from the last 2 years. This one is pretty much non-negotiable. The days of "stated-income" loans are long gone.
-Most Recent copy of your credit report and fico score (This is mainly for your purposes only, just to get you a general idea of what you'll qualify for. For now, if your score is in the low 700s, or worse, be prepared to pay a bit more for your mortgage (ymmv, it heavily depends on numerous factors, but ideally you want to be as close to an 800 fico score as possible. This also gives you a good opportunity to see what exactly is on your credit report and make sure there aren't any irregularities or negative items on there. I recommend www.annualcreditreport.com for a free copy of your report. (By Federal Law you're allowed one free copy of your Credit report per year) FICO you'll probably have to pay 20-40 bucks for as very few places offer them for free. )
-A solid idea of how much you can put down as a down payment, either through proof of documentation (bank statements etc, they WILL check into this so don't fudge em)
These are usually the core items that you'll need, depending on each individual bank requirements, they may change or ask for something else, but you can count on needing at least some of the aforementioned items there.
I wish you luck mate! I'm currently in the same situation, but I don't think i can swing it given what I'm making at the moment so we'll have to see!
Wud yoo laek to lern aboot meatz? Look here!
Speaking of which, find out EXACTLY what the condo fee covers. Check for lawn care, snow removal, garbage, sewer, heat, hot water, and so forth.
Also, remember that you will possibly have to pay a realtor fee, and you'll definitely want a lawyer to look over the condo docs and the mortgage for you. That will cost you more than you think.
IOS Game Center ID: Isotope-X
That sounds like a good deal, and all the financial details are prtetty well covered, so I'll just mention some things I learned about condo ownership.
Assessments - They can be anywhere from $0 - $500 and up a month. I would guess yours will be near $300 based on the unit prices. It will go up every year, plus they will have "special assessments" to fix things likie the roof or other major projects.
Property taxes - Expect to pay $2000+ a year for Cook County taxes. This can be figured into your mortgage, and escrowed for you.
General repairs - already covered, but worth saying again, as it can add up.
The Property - Seems like a good place, as you want to live around older people; it's actually a good thing for property values and general peace orf mind. Plus they hate spending money, so they'll fight any tax/assessment increase. Take a look at the Census info on Education Levels, Median Income, etc.
Mortgage - No Fixed, no home for you! No matter what the bank tries to offer you, if it's not a 30yr Fixed, don't do it.
What Thegreatcow said about condo association fees were right on. In addition to finding out if a high number are being foreclosed upon, you also might want to find out if the developer still owns a large number of the units or if a high number are rental units. The concerns of non-resident investors might be counter to the concerns of owner-occupiers.
Don't bite off more payment (mortgage + taxes + insurance + HOA fees) than you can afford to pay for at least 5 years. If you think you can get out of the investment in 5 years, plan staying there 7-8. Also do you have a friend in real estate who might help you with the transaction, perhaps at a reduced fee? If the seller wants to save commissions then that means avoiding third parties to the transaction, and there's going a 2" 3-ring binder full of information to go through, using terms with which you may not be familiar. The paperwork needs to be done correctly or you may find an incredible hassle when you try to sell.
If you do buy I wouldn't worry about filling it up with furniture, that's a very minor concern compared to deciding if it's a good investment and making sure transfer of ownership is done properly. In a few months you could fill it up with inexpensive listings from craiglist if you want to have a bunch of stuff.
Check what the occupancy rate of the building is and how much association fees are. If occupnacy is on the decline, association fees are going to increase.
With a bit of help from my parents (interest free loan) I could probably come up with maybe 10% down.
I already talked a bit with a mortgage broker. Paid him $25 to "qualify" me or whatever. He ran my credit and whatnot, I had to give him some tax returns and pay stubs and whatnot as well.
My credit scores are in the high 700s
What he told me - I could get a loan up to $180k (way past my comfort limit). 30 year fixed. ~6%.
But this might not mean I could actually secure the thing?
I'm confused.
I work as a credit analyst/mortgage underwriter in New Zealand and brokers call our company and run scenarios for such things, but until everything is actually sent on to the actual funder, nothing's certain.
Take what I say with a grain of salt though given I am in NZ - while the fundamentals will be the same, there will be a ton of details in the US mortgage market/product lines I have no idea about.
Remember the mortgage will be for the price of the place, plus taxes, plus insurance, plus etc.
Oh yeah - homeowner's insurance - you'll need that too. It's pretty cheap, much less than car insurance.
Ask the broker how being gifted a large chunk of the down payment affects things: they may want additional documentation. The down payment is supposed to indicate you have the financial responsibility to have saved up the down payment and not spend it. We had a portion of our down payment gifted to us when we bought, and the mortgage broker wanted additional documentation regarding the gifters financial status. Different brokers may have different requirements, but it would be good to ask about this to avoid surprises.
Try not to move money around between your accounts, other than your normal account operations. I was told this by my real estate agent and mortgage loan officer; I'm assuming that whoever's crunching the numbers doesn't want to see a bunch of abnormal activity.