Is buying a condo different then buying a Single Family? Things to know when buying a condo.

Is buying a condo different then buying a Single Family home? Jeff & Jason discuss some need to know items when buying a condo.

The mortgage market is always constantly changing which is why it's so important to talk to Jeff and/or Jason about your real estate goals when buying a condo in Massachusetts.

Things to think of:
- The buildings Owner Occupancy Rate
- Investor Concentration
- A condo association budget and Reserve Account
- Condo Document Restrictions
- A condo association approved by FHA/Fannie Mae
- Adding the condo fee into the monthly payment obligations

In this video, Jeffrey and Jason breakdown the main points of consideration when buying a condo. Each transaction is always different, but these generalities are a great starting point.

Should you have any questions, then reach out to Jeffrey at 617-480-2600.

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Transcript of Video:

- Hi, I'm Jeff with the REN network today. We're here with Jason Bonarrigo RMS mortgage. And we're talking about things to know when buying a condo. So buying a condo is a little bit different than buying a single family, right?

- Sure.

- Okay.

- So one thing that I constantly hear about so questions to ask to make sure even before you even go on a show. Sure.

- Right.

- I'm thinking one is what's the owner-occupancy rate. Why is that so important?

- It it's massive really because it's it's owner-occupancy rate or investor concentration. What you don't want to do is all of a sudden you're buying into a 60 unit building and you realize that 50% of the other units are rented out right. Or owned by one entity. Or most of them are second homes where people are investment properties and they rent it out and you don't have true owners living next to you and upstairs from you. And that can factor in the way, just the way you live but then obviously factors into the financing.

- Well, and look this number always changes generally right now, 50% is that big number that says, Hey anything over 50% owner occupancy, you can get in the property for a lower down payment

- Conforming

- Conforming

- Conforming financing, kind of natural financing if you will, Fannie Mae financing, some of the buzzwords. But yeah, that's always been the golden rule and you should be able at 60-40, we'd like to see owner-occupancy ratios, but Fannie Mae's guidelines always change and update. And there's some streamline stuff depending on the down payment. But yes, let's just say 50% On average is a good enough.

- And it makes sense. I mean, because if you have more owners living in the building, then they're going to take care of the building better because they live in the building. They go in and every single day hallways are good.

- Right. And you're not renting it out to maybe, you know a high traffic area or college students and things like that. Nothing's anything wrong with that, but just something that you really want to be wary of when you're buying a condominium.

- Right. It's important to know that yeah, I quote unquote own the house, but the bank actually owns it with me.

- Sure.

- They want to make sure that their asset is taken care of. And that's why owner-occupancy rate matters so much the other thing to that point and it being taken care of is a question to is, Hey, what is the percentage going towards reserves and how much is in the budget, right?

- sure.

- Because that really matters. If it's a conforming loan, the percentage of the monthly revenue matters from how much it goes to,

- of course

- They want to be in the black, right. Which is the main thing.

- They don't want to lose money.

- They don't wanna lose money. Right. Well, and again, I think Quickly, that's the biggest reason why a single family and a condo is much different, right? So when we look at it from the banking side of things we're underwriting you, Jeff Chubb, the buyer but we'll also taking a really hard look and underwriting the condominium complex, because again we're not buying one two, three main street we're buying into Other units,

- We're buying a percentage

- percentage.

- How does that manage, who takes out the trash? Who does the snow removal on and on? Right. So the budget as we call it is massive. And 10% allocation has to be perfectly me and Freddie Mac that has to be allocated essentially their profits have to be allocated on a quarterly or yearly basis to that.

- To the reserve account

- To the reserve account

- because all of a sudden what if a tree falls in and cracks the roof Wide open and they need to fix that.

- The Oh crap account.

- Oh crap.

- Oh my gosh. We need to replace the roof. We need to do X, Y, Z, and repairs that are unexpected

- It happens.

- And then that's why the reserve accounts are so important. So, okay. So investor concentration, this is one that's always made a lot of sense me is that if you're buying condo it matters. If one investor owns multiple units, certain percentage of the building

- One entity is probably may cause it, right.

- Because if that investor goes belly up and stops paying the condo fee, well, that means that

- Or has crappy tenants. So it reduces the rent roll, right. Or in many, he has too much power.

- Right,

- Right. It's one of the guys who has too much power on the board and you know, the board of trustees. So which, which is true. And maybe he is on the, the board. So there's just too much influence there. So again, the lenders don't like that there's too much risk involved. Fannie Mae, Freddie Mac. Don't love that. So that's one of the things, again that we look at for you in protecting you. And again, it's some of the questions that you're not going to always remember, but again you're asking beginning your trusted realtor is going to ask those questions and they're obviously going to talk to the bank and we're underwriting that for you. So again, you can feel good when we kind of rubber stamp a condo. We're rubber stamping in the same sense that we're going into a partnership tomorrow.

- And to that point, if it's, if it's a conforming loan at Fannie Mae Freddie Mac, you actually have to get the condo association to approve.

- We have to rubber stamp.

- Right

- It's actually, I mean essentially

- they actually have to rubber stamp it first and then you...

- Exactly. And then we can say, Hey then we can let we call it lending in their lending, in that project. And once it's certified it's usually good for about two years. But again, that's something that we're very familiar with. And myself working in Boston, a ton I've been doing condos for 12 years. So that's, it's vital. And you need to kind of understand.

- And from my end, that's one of the things cause RMS mortgage they have a direct window to FHA.

- Correct

- So it actually speeds up that, that approval timeline. Yeah. We to look them right in what you call delegated we can essentially underwrite for them because we've done enough of them that have performed in a good fashion. So we have a kind of direct link to them.

- That's huge.

- That is good.

- So, so, you know, restrictions on condo docs. I remember actually we had a deal and then they dug into the condo docs and there was a first writer refusal which FHA felt was discriminatory. And so therefore

- They don't like that.

- Our buyers couldn't buy the property. So, you know, there's certain things in condo docs that an attorney is going to help you review and things of that nature, but...

- Which is something to watch out for.

- But also if you have a dog, right you want to know if the dog's allowed in the condo

- Right. The size of the dog, right. The dog, so massive.

- So those condo docs matter alot

- And again, we can't stress that enough. You want to have a good real estate attorney look over those condo docs before you buy him into it. Because again, once you sign that contract you're buying into those bylaws and that master deed and essentially everything that's come before that. So it's massive to see that that's going to affect you in the longterm, not just right now.

- Right. And here's one, we see a lot. Right. Well, you know, well really a lot of the people that haven't been educated, you know so a lot of times I I've seen it on the seller side, my clients generally I think that we educate them well enough that they know but on that one is okay, you've been pre approved so you have a budget. Okay. And then you're told you can go out and buy for X amount. Right. And then all of a sudden that $500 condo fees added in, plus the taxes

- The dreaded condo fee.

- Yes. So what happened?

- Yeah. Well, I mean, again, so that's something that, again I'd like to think obviously a good realtor and a good lender a good banker is to the client upfront, Hey are you looking for a single family? You're looking for a condo, but to your point sometimes they say, they're looking for a single family. And at the last minute they buy a condo. But so all of a sudden now we're plugging in let's just say a $580 HOA or a condo fee and taking away $125 insurance estimate than I had. And now that's a $400 difference. Now it could affect the qualifications. So it's, it's just massive to know those numbers.

- If you're qualified at say $2,000 a month.

- Yep.

- And the principal and interest brings you at 1800 and then there's a 400 additional whammy. If you will, from the condo, it can now all of a sudden make it. So that way you don't qualify. or just maybe if you're qualified, that's fine. But what if your own budget expectations have changed? Right? You have to factor that in and sometimes like a first-time homeowner or a client just doesn't they don't know the difference to ask that question or be aware. So again, when you're looking at a condo, some of these things are really key to ...

- Many nuances So I mean, there's many nuances that you need to be and that's look, that's why you ultimately hire, I mean most likely it's maybe the first or second time somebody bought a house, that's why you hire somebody who's sold thousands of these things. Right.

- Right.

- Yeah. That's true.

- That's true. I mean, you don't know what you don't know. Right. So, I mean, you just have to know, but to some key points and hopefully this information helps them be busy selling the key questions.

- Right. So you're Jason Bonarrigo regard with RMS mortgage. How do they get to you I am I am 413-5038. Or send a text with me.

- And I'm Jeff Chubb with the Chubb homes team. And we're brokered by exp Realty. You can always reach us at 480-2600. Or visit us [email protected].

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