Buying a condo

[usi2004]

I'm looking to buy a condo , it is $46,900.
I make 29,900 a year, only debt I have is a credit card that pay 46.00 a month on (on a 0% interest for 5 years to pay off) and my car that is 222.16 a month. Which will be paid off in November. I'm not sure if the price is too high for my income, and if it isn't how much should I save for a down payment?

Thanks!

[DebbieL]

Sounds like this price is very manageable for your income. What are the monthly maintenance fees? I wish things were that cheap where I live. You can't even get a trailer for that here. Average house price is over $500k right now (yes, I live in a housing bubble area). I can't wait for prices to come back to sanity here (although they were never as low as what you have - lucky you).

[Ima saver]

Do a lot of investigating about the condo association. I bought one for a rental and had all kinds of problems. They had trouble paying the water bill and the water was turned off. The roof leaked and they would not fix it. However, if it checks out ok and the fees are not too high, that price is great. You can't buy anything under $100,000 around here.

[usi2004]

The Condo fee's are 150.00 a year , and yes its VERY reasonable here. But , its also only a 1 bedroom condo and small. When you go across the street it's 124,000 for a 2 bedroom with only 916 sq ft.
The realtor said that the water is paid by me, so ...is that not normal?

Oh..another thing. On a condo you have to pay PMI if I pay less than 20% down and do I have to have home owners insurance or just contents?

Sorry! I've never bought a house before , and noone I know has ever bought a condo and know nothing about it!

[jIM_Ohio]

My first house was a condo, we had PMI for 2 years until we refinanced it off.

Here's what I would check:

I saw no mention of property taxes. Do you know what they are?
what is condo association dues paying for?


here's list you are looking for (for condo association)

water
snow removal
trash
liability insurance on building
roof repairs
last time fee was increased
last time fee was decreased (does happen ONCE in a while)
other amenities
parking lot maintainance
swimming pool
club house
last time roof was replaced on your unit.

I would then look at following:

what is %income which will be used for condo monthly payment (front end ratio, bank will look for 35% plus or minus)
what % income is going to debt payments (back end ratio, bank will look for this to be high 40%'s or lower).

You mentioned the minimum payment on the credit card, but not the balance or when it will be paid off.

If you cannot put 20% down, ask for an 80-15-5 program. Put 5% down, get a 80% first mortgage and 15% second. You will possibly get more tax deductions this way.

Here's a few other issues to think about:

With such a cheap condo/mortgage amount, it is very possible there will not be enough interest paid each year to exceed standard deduction when filing taxes.

What is cost to rent in area? (relative to payment you would have on condo). Renting reduces your risks and could possibly be a better short term financial move to save for something bigger.

My calculations suggest 46.9k for a condo, 6.125% interest is a monthly payment of $285. The first month's principal payment is $45.54 and interest payment is $239.58. The interest the first year is $2859.

Change this a 15 yr mortgage and payment is $399. First month's principal is $159.49 and interest is $239.58. Interest first year is $2820.

Do you itemize taxes now, have you considered tax implications of owning property? Property taxes and itemized deductions on income taxes?

[usi2004]

No, right now I do not itemize on the taxes. With interest being so low, and I put that interest on my taxes could I possibly end up OWING money?! And what do you mean tax implications ? I just always thought it was better to own than rent.


Right now I pay 380.00 in rent, that includes all utilities, only paying Cable and phone bill. Very cheap .

I just cannot stand renting. I feel like I'm wasting money (which I am) and for very little more I could own it. Although, I don't want it to be worse in the long run.

I also will be able to put 20 % down and can probably get the condo for less than the asking as its been on the market for nearly a year.

[LuxLiving]

Ask your realtor about any incentives, grant or bond monies that might be available for a first time home buyer. These are generally used to help you get into the place. If you can save back some of the cash you have available, as there is always something unexpected you need to buy when you make a move! One thing to think about in this vein is if local utilities that you are personally responsible for paying will be making you put down a deposit to change services over to your name.

I bought a condo as my first home and it worked out well for me. Can't remember all the details as it was eons ago, but I did get some help in terms of bond money to help with the down payment.

Good luck!

[jIM_Ohio]

You wouldn't owe on taxes... you just need to learn some of the finer points.

If you are single, your standard deduction is $5350.
If you end up paying more than $5350 in mortgage interest and property taxes, you can itemize and get some of this money back.

It's cheaper being debt free, but for every $100 you pay in interest and property taxes, you will get $25 back, I think (you are in 25% tax bracket-barely).

I am assuming you are single for the tax calculations. This changes if you are married.

$380 for rent vs $285 to own looks good in your favor... you could also do the 15 yr fixed for $399 without much difficulty (this helps you own condo faster).

Owning is NOT always the best way to go. Roof repairs? Structural repairs? Electric maintainance? HVAC work?

If you rent, this risk is on the landlord. If you own, you assume this liability and expense. There is risk with property ownership. You are rewarded for this risk with an asset which can appreciate, hold it's value, and possibly generate income.

Have you tried applying for a mortgage? Credit history and credit scores come into play, as well as the debt you currently have. My suggestion would be to apply for "pre approval", then look into the structure of the unit.

Hire a building inspector ($350) to look at property for you. He could tell you state of roof and HVAC, for example. If he finds a problem, he'll save you lots more than the $350 you spent. You could also use this info for negotiating purposes. If condo needs work, offer low on the unit.

We beat up our condo, replaced a few things the cheap way (dishwasher, HVAC work). We painted over border which would not come off the walls (even with fabric softener). Make sure you know the status of the unit as best you can prior to signing anything.

The other thing which catches my attention, if renting cost is so close to owning, I see a good real estate investment opportunity. You could put 20% down, rent out, and make money that way. There are lots of tax deductions for renting. Also lots more risk. I'd be curious what city this is in...

[LuxLiving]

Jim is right about some 'need repairs' things being your responsibility. Trick to buying a condo is finding out before you buy where your responsibility begins & ends. Where I bought I was responsible for wall to wall. Inside the walls, plumbing, ac/heat, roofing was all on the association and was covered by my HOA fees.

This is stuff you will need to know up front before you decide to lay your money down. Some of this could differ as you can well imagine. Say, if your condo was in a patio type home under seperate roof than something like an old brick 10 story building all under one roof - these are where differences can come into play. My condo association had a full time maintenance man on staff. Something broke, you called him. Others may be different. It will be your responsibility to study the situation before hand and consider if you're still willing to bite.

Let the buyer beware.

[jIM_Ohio]

In this situation, with such a LOW condo fee, I would definitely research the ins and outs of the structure.

Means site might not carry enough insurance, or let certain things slide which are not wise.

[usi2004]

I am single with no kids, so according to that, I couldn't itemize
My Credit score is 679 and the debt I have is my car, 222.19 a month , paying off in November of this year, and about 2300 on a credit card. I'm paying 46.00 a month with 0% interest for 3 1/2 more years.

Have you tried applying for a mortgage?

Yes. I did apply for a mortgage and was preapproved, and have also had my father (an inspector ) look at the property, roof is 18 months old, everything looked great.

Basically since the taxes on this condo would not be over the standard deduction for me, I wouldn't get any type of tax benefit ?


The other thing which catches my attention, if renting cost is so close to owning, I see a good real estate investment opportunity. You could put 20% down, rent out, and make money that way. There are lots of tax deductions for renting. Also lots more risk. I'd be curious what city this is in...


This is why I am worried! The rent is SO cheap, if anything happens, I just call my landlord, but, I can't do anything I like to the place and my dog's currently have no yard whatsoever. Although I'm totally excited, It's just a huge investment!


Oh, and you were wondering what city, I'm in Owensboro, Kentucky.

[jIM_Ohio]

I've actually been to Owensboro once and have worked across the river in Indiana a few times (Jasper).

I think you have done homework... what was your question again?

[Ima saver]

I understand that property is very cheap in Kentucky. It sounds like a good deal.

[Elgin526]

I bought a $108,000 condo when I made around $35k a year, and I only had 3% down, so I think you should be fine. My total monthly payment (mortgage, taxes, mort. insurance, condo insurance, and monthly assoc. dues) was about $1100 a month. After a couple of refi's, I got it down to about $900 a month within a few years (this was 2001-2004 when rates were droping). When it was $1100 things were tight since I also had a $250 a month car loan. But once the car was paid off and I lowered the mortgage payment via refi, I was doing just fine.

Condo insurance is cheap like renters insurance, but it does cover a few more things. Usually,the assoc. insurance only covers the structure itself, everthing IN the condo from the drywall into the unit is covered by your condo insurance. Things like kitchen cabinets and carpeting, and your furnace and water heater if you have one in unit (mine did). My condo insurance was about $150 a year in Illinois, not much more than renters insurance in my area.

Oh, I noticed you have a dog? CHECK WITH THE CONDO ASSOC. FIRST!!! Not all condo's allow dogs or have size/breed limits. Get their policy in writing before making the offer, do NOT rely on the seller to tell you the truth. I found this out the hard way. I got lucky and my assoc. let my dog stay since she was only 5 pounds over the limit, but other assoc. might not be as nice.

[usi2004]

I think you have done homework... what was your question again?

Pretty much everything has been answered, I just wanted to be sure
I wasn't completely crazy for thinking about buying this with only making 30,000 a year, and that being the only income!

Thanks guys! I guess I just need to sign some papers, cause, it really is a good deal for me!

[disneysteve]

What do you have in the way of savings and emergency fund? Do you have any disability insurance? What would happen if after you bought the condo, you lost your job or got injured and couldn't work for a while? Do you have enough savings to continue paying the mortgage and all the expenses?

What about savings/EF if a significant repair crops up in the condo? Owning can be a lot more expensive than renting and you need to have a much larger cash reserve since everything is your responsibility.

In addition to finding out if the condo allows dogs, also find out if you can get homeowner's insurance. Around here at least, many companies won't insure you if you own a dog.

[tinapbeana]

Originally Posted by disneysteve

In addition to finding out if the condo allows dogs, also find out if you can get homeowner's insurance. Around here at least, many companies won't insure you if you own a dog.

that's odd: around here you often get LOWER rates on homeowner's if you have a dog, it's considered a protection mechanism. may just be the difference between more urban and more rural areas.

[LuxLiving]

Don't forget to spend an afternoon or evening talking with the folks who would be your new neighbors. How is it working out for them? What's been happening with the association? with the building itself? How does assoc. keep up w/the maintenance? What are the meetings like? (Actually I'd probably want to attend one or two.) Perhaps you need a weasel clause in any offer you make that you want to reserve the right to withdraw your offer until after you can attend a meeting and look at the associational books.

[disneysteve]

Originally Posted by tinapbeana

that's odd: around here you often get LOWER rates on homeowner's if you have a dog, it's considered a protection mechanism. may just be the difference between more urban and more rural areas.

Many companies exclude certain breeds (pit bulls, etc.). Others will insure you but exclude any claims related to the dog - bites, etc. I guess they know statistically that homes with dogs have higher claim rates. Same goes for swimming pools.