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IS IT FINALLY TIME TO BUY A CONDO?

condoExcerpted from an article by Jaymi Naciri for realtytimes.com

“The popularity of condos has swelled and waned over the years, gaining popularity especially in areas where buyers may be priced out of the single-family home market….

Despite their greater affordability, condos have been harder for buyers to get approved to purchase unless they had a large down payment.  That’s because the Federal Housing Administration (FHA), a popular source of loans for first-time buyers because they’re (a) government-backed; (b) require as little as 3.5% down; and (c) are often a solution for buyers who have less than perfect credit, has historically only approved a small number of condos for their financing, leading the LA Times to previously call condos an “FHA no-lending zone.”

But that may be changing with new legislation that was just signed by the President….”President Obama has signed H.R. 3700- the “Housing Opportunity Through Modernization Act” into law.  The National Association of Realtors hailed the development as a significant step in eliminating barriers to safe, affordable mortgage credit for condos.  NAR has long been an advocate of the bill, testifying before Congress and lobbying for its passage…passed unanimously by Congress, the bill lowers the owner occupancy requirement for condo complexes from 50% to 35%…that means more condos could be purchased with a 3.5% down payment, well below the usual 10-20% requirement….and that’s huge news for condo buyers who have experienced the frustration of searching for an affordable property only to be shut down by a lack of available inventory.  While the FHA does their 90-day rule-writing  exercise on owner occupancy, we can take a look at some of the pros and cons of condo ownership.

PRO:  No exterior maintenance.  If you’re looking for a lock & leave lifestyle, or if you don’t want to care for a yard, this is a big bonus.

CON:  Maintenance has to be done by someone, so you’ll be paying a homeowners’ association fee = HOA.

PRO:  If you have an HOA, you probably also have amenities in the community, like a pool or gym, that you may not have in a single-family home.

CON:  You still have to pay for the amenities even if you don’t use them….and HOA fees are not tax deductible.

PRO:  If you DO use amenities, you might meet some neighbors, which could make living in your condo even more enjoyable.

CON:  Sometimes, close quarters translates into more traffic and some noise.  In a condo, you’ll  typically be sharing at least one wall, and probably at least one floor as well.

PRO:  A condo you buy is still something you own, and the benefits of owning real estate are many – pride of ownership…tax benefits.  You’ll love being about to write off your mortgage interest, which on average is about $1,900 a year in savings – plus any points on your mortgage, property tax and private mortgage insurance (which you’ll need if you’re putting less than 20% down.)

CON:  Condos are traditionally harder to sell than single-family homes.  Why?  Because they pretty much all look the same.  And…condos often appreciate in value much slower than single-family homes because you don’t own any land, which is often the biggest driver of appreciation.  Instead, you own a living space.

PRO:  You might not care about re-saleability if a condo is your one shot to get into a neighborhood or area you like or your only shot at home-ownership.

CON:  You may have to pay an assessment.  Before buying a condo, request and read the documents that apply to the management of the complex.  (is there an assessment pending?)  How big is the condominium’s reserve fund? Read the rules and restrictions to make sure you can live the lifestyle you’re seeking…”

SOURCE:  Jaymi Naciri for realtytimes.com

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