Securing Financing for a Condo
Homebuyers who want to invest in a condo reviews the current financing requirements for the purchase. How the buyer intends to use the property determines what kind of financing the buyer can obtain. Reviewing how to secure financing for a condo helps the buyer answer vital questions that guide them through the process.
Is the Property the Primary Home?
Some mortgage home loans require the buyer to purchase a primary home with the loan product. Some FHA loans are restricted to primary homes only. When financing the property, it is necessary for the buyer to make this distinction to the lender. Vacation property purchases can lead to higher down payments for the loan since the property won’t be occupied frequently, and the lender needs more financial security for the loan.
Are There Restrictions on Financing the Condos?
The condo must be owned outright by the borrower after they pay off the mortgage. The seller cannot just give the buyer the right to occupy the dwelling without ownership. The condo must be residential as well as the properties connected to it. The condos or the surround properties cannot be used for hotels or any other commercial reason.
The property must be in great condition and shouldn’t require extensive repairs. The property must be inspected according to the current real estate and mortgage laws. Some lenders will require an appraisal in addition to the home inspection to assess the true value of the property.
Does the HOA Require Fees?
Condos that are situated in a condominium community are managed by a homeowner’s association. The property must meet all HOA requirements before it is listed on the market. All condo owners in the community must pay fees for maintaining communal areas of the community. The fees must be paid according to the schedule that the HOA sets up, and the borrower could face penalties if they don’t comply with these requirements. The fees must be paid before the buyer receives financing, and the lender can monitor the payments according to the terms of their mortgage loan contract.
What are the Insurance Requirements for the Property?
Condo owners must purchase their own policies for their condo. However, the HOA has a master policy for all the condos. The master policies cover the cost of damage to communal areas, the exterior of the condos, and damage to any fixtures that are installed on the property permanently. The condo must be covered by flood insurance, and the condo owner must maintain the policy if the property is in a designated flood zone. Some lenders will require private mortgage insurance until the borrower has paid at least 20% of the mortgage amount. All insurance policies must be purchased by the buyer before the property closing.
Condos are a great investment for a vacation or primary home. When reviewing the properties, the buyer must consider how they want to use the property. Condo purchases require the buyer to pay fees and purchase additional insurance policies. Homebuyers who have questions about financing a condo can get more information more from Dustin Dimisa today.