Columbus condos have been very popular with first time home buyers and empty nesters before the mortgage crisis. Condo life has its advantages. You don’t have to cut the grass in summer or clear the snow from the sidewalk in winter. Columbus condos may even offer the luxury of a swimming pool, fitness center and a club house.
However, since banks adjusted their lending standards in 2009 and 2010, Columbus condos became the “black sheep” of real estate. Many condo owners will find it very hard to sell their property. You may even be stuck with a condo you can’t sell at all.
The Dark Side of Columbus Condos
Let me give you a some insight into the dark side of Columbus condos and why you should think twice before you submit an offer to buy one in 2010.
To start with, you need a higher income to qualify for a condo loan than for a residential home loan.
Typically, lenders allow a certain percentage of your income to go towards your mortgage payment. That’s the so-called debt-to-income ratio. Currently, FHA allows a debt to income ratio of 29%. This means that your total mortgage payment (principal, interest, taxes, insurance) cannot be higher than 29% of your gross monthly income.
When it comes to condo loans, however, the lender will also add the condo fees to your monthly payment. This means that the condo fees must be covered by 29% of your income. With condo fees of $150 to $250 per month, the amount you can borrow for your condo purchase may be $15K to $30K less than the loan for a single family home.
But that’s only the case, if FHA will write a loan for your condo at all.
Your condo will have to meet certain requirements for FHA (and most other conforming lenders) to underwrite the loan. Before you make an offer on Columbus condos, go to the HUD website to see, if your condominium project qualifies for FHA financing.
FHA Lending Rules for Condos
- Less than 10% of the condo project should be rental units.
- The construction of the condo complex also has to meet FHA guidelines.
- Many lenders will refuse to write a loan, if one person owns more than 10% of the condo project.
This means that you cannot get conventional financing for condos in developments where one person owns 10% of all units and more than 10% are rentals.
So what can you do, if you want to buy a condo in one of these projects. You can pay cash or try to get non-conforming financing, which usually requires down payments of 20 or 25%.
Due to these rules and the stricter lending guidelines, some Columbus condos are extremely hard to sell. Condos may seem a less expensive option for home owner ship. Unfortunately, the higher down payments and lower loan amount available for your income will make condos less attractive in the future.
If you own one of these condos, you may have a hard time selling it to an owner occupant. Investors may step in and buy up some of the units, but usually they pay less than market value. Not only does this lower the values of condos in you project, but it also increases the number of rentals which in turn makes it impossible for owner occupants to get financing and buy you unit.
Thanks for reading the susannenovak.com Blog!
Posted by: Susanne Novak, ABR, FIS, GRI
Columbus Real Estate Agent helping First Time Buyers.
(614) 975-9650