Do Condo Fees And HOA Fees Affect How Much I Qualify For?

January 20th, 2016

condo building

Condo HOA fee impact a mortgage pre-qualification. When pre-qualifying someone for a condo mortgage a loan officer will have to make some assumptions if there is no ratified contract on a particular condominium. In those assumptions would be an estimate of what the monthly condominium fees would be. I personally use $1.00 per thousand of the sales price when I am working up my numbers when prequalifying someone.

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Realize the condominium fee can affect your prequalification numbers

If you are looking at a condominium that has an association fee that is higher than my arbitrary estimate it would push their mortgage prequalification numbers down. If you are looking at a condominium that has an association fee that is lower than what I used you could borrow more on their mortgage that I initially stated,

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Below is an example.

My assumptions during pre-qualification:

$500,000 maximum purchase price

$400,000 mortgage prequalification

20% down payment

$400 monthly association fee assumed

Potential purchase a mortgage borrower is considering:

$520,000 purchase price on condominium unit the buyer is interested in

$416,000 mortgage needed

20% down payment

$300 monthly actual association fee

In this case reducing the monthly condominium fee by $100 easily makes up the request for an additional $16,000 in mortgage. But if this hypothetical mortgage borrower were looking at a $520,000 purchase price and a $416,000 mortgage with a condo fee of $500 a month, the numbers would not work.

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Clients need to think about the Condo HOA fee impact

I had a client that I had prequalified for a maximum of a $500,000 mortgage with a $625,000 purchase price and a 20% down payment. I assumed a condominium fee of $625 a month. The very first unit that they found during house hunting had a condo fee of over $1000 a month. And an asking price of $600,000! It was a full service building, with a 24-hour front desk, a rooftop pool, and a large gym. So the condo fee covered quite a few amenities. Although they really liked this particular unit, they could come nowhere near qualifying for the necessary mortgage because of the large condo fee.

Conclusion

The moral of the story is that after getting prequalified for a condo mortgage, you’re going to have to be careful. Before making an offer speak to your mortgage loan officer. Make sure you are on solid ground with the particular unit you are looking at. The same thing goes for property taxes as well as interest-rates. Prequalification numbers are an arbitrary estimate. They will have some level of fluctuation that you always need to research before making an offer.

Contact me to discuss your local condo market, mortgage rates, or other mortgage questions. Click here to schedule a call. Or you can email me directly.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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