First Time Buyers
Is this your first time buying a condo? Here are the most common questions asked by first time condo buyers:
· Why should I buy, instead of rent?
Answer: A
home is an investment. When you rent, you write your monthly check and that
money is gone forever. But when you own your condo, you can deduct the cost of
your mortgage loan interest from your federal income taxes, and usually from
your state taxes. This will save you a lot each year, because the interest you
pay will make up most of your monthly payment for most of the years of your
mortgage. You can also deduct the property taxes you pay as a homeowner. In
addition, the value of your home may go up over the years. Finally, you'll
enjoy having something that's all yours – a home where your own personal style
will tell the world who you are. With that said, individual circumstances differ. Hopefully this calculator, along with the rest of the information provided on this site, will help you make a decision of whether or not to take a plunge into home ownership!
· I bought a house before, is buying a condo any different?
Answer: YES!!! There are several components to the condo purchase transaction that are the same, however, buying a condo is very different from buying a house. There are different things you have to consider (including Association structure, financial position of the building, reserve study and deferred maintenance components…………Not to mention possible restrictions on pets, parking, unit use, rentals, etc.) And that's just a tip of the iceberg (Click Here to read on about what else makes condos unique and what questions you should be asking when purchasing a condo). If you are using a different brokerage, make sure the agent specializes in condos and understands the structure of the process.
· Should I use a real estate broker?
Answer: Using a real estate broker is a very good idea. All the details involved in condo buying, particularly the financial ones, are mind-boggling. A good real estate professional will guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering. He or she will help you figure the price range you can afford and search the multiple listing services for condos you'll want to see. With immediate access to condos as soon as they're put on the market, the broker will save you hours of wasted driving-around time. When it's time to make an offer on a condo, the broker can point out ways to structure your deal to save you money. He will explain the advantages and disadvantages of different purchase offer tactics, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. He will help you go through hundreds of pages of the resale certificate to make sure you know exactly what you are buying into. Best part – you don't have to pay our brokers anything! Washington Condo Brokers Inc. collects the payment from the seller of the condo – not from the buyer. We serve as a Buyers' Agents in the greater Seattle area, contact us today!
· Is condo living for me?
Answer: Before purchasing a condo in Seattle, there are many factors you should consider to make sure condo living is a right fit. Do your research, understand the pros and cons of different condominiums. You can find a lot of information about major things to consider HERE.
· How much money will I have to come up with to buy a condo?
Answer: Well, that depends on a number of factors, including the cost of the condo and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the condo; the down payment, a percentage of the cost of the condo that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a condo (the earnest money you pay in the beginning will go towards paying your total closing costs at the end)
When you make an offer on a condo, your real estate broker, will deposit your earnest money with an escrow company, a neutral third party that will handle the financial part of the transaction. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies and is generally between 1% and 5% of the condo purchase price.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of conventional loans require 10-20% of the purchase price. Other loans require only 3% to 5% down – and sometimes less. Ask your broker to refer you to a mortgage specialist that will help you structure your future mortgage.
Closing costs – which you will pay at settlement – average 2-3% of the price of your condo. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise.
· How do I know if I can get a loan?
Answer: Use one of our calculators to see how much mortgage you could pay – that's a good start. If the amount you can afford is significantly less than the cost of homes that interest you, then you might want to wait awhile longer. But before you give up, why don't you contact a real estate broker? One of our brokers will help you evaluate your loan potential and point you to a right mortgage broker based on your situation. We know what kinds of mortgages the lenders are offering and can help you choose a lender with a program that might be right for you. Another good idea is to get pre-qualified for a loan. That means you go to a lender and apply for a mortgage before you actually start looking for a condo. Then you'll know exactly how much you can afford to spend, and it will speed the process once you do find the home of your dreams. Keep in mind, not all condos qualify for the same types of loans, in many cases, the Condo Association itself has to apply for programs in order for the buyer to qualify. Ask your broker to help you understand that part of the process.
· How do I find a lender?
Answer: Ask us for help. You can finance a condo with a loan from a bank, a savings and loan, a credit union, a private mortgage company, or various state government lenders. Shopping for a loan is like shopping for any other large purchase: you can save money if you take some time to look around for the best prices. Different lenders can offer quite different interest rates and loan fees; and as you know, a lower interest rate can make a big difference in how much condo you can afford. Talk with several lenders before you decide. Most lenders need 3-6 weeks for the whole loan approval process. Your real estate broker will be familiar with lenders in the area and what they're offering.
· In addition to the mortgage payment, what other costs do I need to consider?
Answer: Well, of course you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you WILL have homeowner association or condo association dues (in some cased, your dues will include some or most of your utilities). You'll definitely have property taxes. Taxes normally are rolled into your mortgage payment. You will likely have insurance (if you are working with one of our brokers, we will help you understand what type of insurance the condo association carries to make sure you get the right coverage for your condo). Again, we will be able to help you anticipate these costs.
· So what will my mortgage cover?
Answer: Most loans have 4 major parts: principal: the repayment of the amount you actually borrowed; interest: payment to the lender for the money you've borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year. Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal – sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.
Note
that your condo dues are usually not included in your mortgage and have to be budgeted for
separately. The good news: much of the insurance and utilities discussed on
this page are included in your dues, just a different way to structure bills
and not necessarily a higher overall cost.The matter of fact, the total average annual cost if often lower than in a house purchase because many expenses are split between multiple owners.
· What do I need to have with me when I apply for a mortgage?
Answer: Good question! If you have everything with you when you visit your lender, you'll save a good deal of time. You should have: 1) social security numbers for both your and your spouse, if both of you are applying for the loan; 2) copies of your checking and savings account statements for the past 6 months; 3) evidence of any other assets like bonds or stocks; 4) a recent paycheck stub detailing your earnings; 5) a list of all credit card accounts and the approximate monthly amounts owed on each; 6) a list of account numbers and balances due on outstanding loans, such as car loans; 7) copies of your last 2 years' income tax statements; and the name and address of someone who can verify your employment. Depending on your lender, you may be asked for other information, the mortgage specialist will go over those details in the initial phone conversation, most lenders will be able to accept documents via email.
· I know there are lots of types of mortgages – how do I know which one is best for me?
Answer: You're right – there are many types of mortgages, and the more you know about them before you start, the better. Most people use a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive condo because your initial interest rate will be lower. There are also several government mortgage programs. Most people have heard of FHA mortgages. FHA doesn't actually make loans. Instead, it insures loans so that if buyers default for some reason, the lenders will get their money. This encourages lenders to give mortgages to people who might not otherwise qualify for a loan. Note that the Condo Association itself has to qualify and obtain FHA or VA approval in order for you to be able to get an FHA loan. Not all condos will qualify. Talk to us about the various kinds of loans, before you begin shopping for a mortgage.
· When I find the condo I want, how much should I offer?
Answer: Our agents are very experienced real estate brokers and buyers' agents, we will help you here. But there are several things you should consider: 1) is the asking price in line with prices of similar condos in the area and in the building? 2) Is the condo in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker will help you arrange one. 3) How long has the condo been on the market? If it's been for sale for a while, the seller may be more eager to accept a lower offer. 4) How much mortgage will be required? How much are condo dues? Make sure you really can afford whatever offer you make. 5) How much do you really want the condo? Generally, the closer you are to the asking price, the more likely your offer will be accepted. In a sellers’ market, you may even have to offer much more than the asking price, if you know you are competing with others for the condo.
· What if my offer is rejected?
Answer: They often are! But don't let that stop you. Now you begin negotiating. We will help you get through the entire process. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn't normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember – don't get so caught up in negotiations that you lose sight of what you really want and can afford!
· So what will happen at closing?
Answer: Basically, you'll sit at a table with your broker and an escrow closing agent. The closing agent will have a stack of papers for you to sign. While he or she will give you a basic explanation of each document, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you're signing. After all, this is a large amount of money you're committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you'll have to supply at closing, and a list of documents you'll need at closing. If you don't get those items, be sure to call your lender BEFORE you go to closing. Finally, don't hesitate to ask questions!
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