At California Mortgage Advisors Inc., we have over 20 years of industry experience in condominium financing. This places us at a significant advantage when compared to less experienced lenders who primarily focus on traditional mortgages. Our Mortgage Advisors understand the nuances of condominium ownership that makes a condo mortgage very different from a mortgage for a traditional single family residence. Our Mortgage Advisors are available at (800) 927-6560 to answer your condominium questions or click here to apply online.
What is A Condo?
Generally, it is impossible to distinguish a condominium from an apartment simply by looking at the two. That is because a condominium is purely a legal term used to define ownership. Specifically, owning a condo means owning all the “air space” located within the walls of the condo. Everything else on the property is usually owned by a separate corporation and held in trust on behalf of the individual owners.
Buying a condo is usually more complicated and costly when compared to buying a traditional home of the same assessed value. To protect their investment, lenders place certain restrictions on condo loans. While these vary from lender-to-lender, restrictions usually cover total ownership by an individual investor, overall occupancy, and outstanding litigation against the condominium association. These restrictions reflect potential instability and are in place to mitigate risk. Unfortunately, checking compliance is an additional layer of paperwork which leads to increased loan fees.
Associated Costs and Concerns
In addition to the difficulty and cost of obtaining a condo mortgage, owners also face unique costs and challenges that owners of traditional homes simply don’t have to deal with.
Covenants, Conditions and Restrictions
CC&R’s are basically the rules that everyone owning a condo in a specific building agrees to abide by as part of their ownership agreement. Theoretically, they are designed to maintain property values and harmony within the community. Unfortunately, many owners find them to be oppressive as they often govern pet ownership, parking arrangements, and acceptable noise levels.
Homeowner Association Dues and Fees
Under normal circumstances, HOA fees and dues cover general maintenance and upkeep. This includes everything from landscaping to building repairs. However, additional fees also have to be levied to cover unexpected expenses such as weather damage or insurance deductibles in the event of a fire.
Disagreements with neighbors are not an issue unique to condo owners. However, renting an apartment provides the option of moving to avoid troublesome neighbors while owning a home means decreased proximity. Unfortunately, condo owners have minimal flexibility in either department. This makes disagreeable neighbors a source of maximum stress.
Part of the cost calculated into HOA fees or dues is used to pay insurance premiums for a building wide policy. Unfortunately, this policy only covers major structural damage to the building itself or to common areas. Individual owners are required as part of their mortgage agreement to purchase HO-6 or “walls-in” insurance. This covers everything inside of the condominium, including the condo owner’s personal possessions. It also covers structural damage inside of the condo including damaged walls, floors and ceilings.
This is actually two separate concerns. The first is that obtaining a loan for a condo where the HOA is currently involved in litigation is extremely difficult. The second issue is litigation that the HOA engages in after the purchase date. If the HOA is forced into litigation for any reason the individual owners may be looking at additional assessed fees. These could be used to cover legal expenses or to cover deductibles in the event of a liability judgement against the HOA.
Owning a condo isn’t necessarily better or worse than owning a more traditional single family home. However, ownership between the two is significantly different. At CMA, our Mortgage Advisors have the experience to provide borrowers with sound advice and unparalleled terms regardless of the type of mortgage they are looking for.
At California Mortgage Advisors Inc., we genuinely believe that we offer our customers the best mortgages in the industry. We have offered a variety of loans since 1993, which means our Mortgage Advisors have successfully matched tens of thousands of borrowers with loans tailored to meet their needs and unique financial situations. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.