Single Family, Condominium, and Multi-Family Home Mortgages
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Are There Differences Among Single Family, Condominium, and Multi-Family Home Mortgages?
There are some differences that you should know. The qualification percentages are the same as are most of the documents you need to submit. All primary requirements (appraisal, credit report, income verification, etc.) are the same. The differences:
- Condominium: Project documents need to be part of your loan package. Documents include condominium bylaws, budget, and all related information regarding rules and regulations. This information comes from the Homeowner's Association and should be obtained by your mortgage lender. You should also have copies of this information because it shows how your new neighborhood is managed and notifies you of any deed/living restrictions (types of pets, insurance coverage provided by the master policy, what costs are covered in your homeowner's dues, etc.)
- Condominium: In addition to your prospective principal, interest, taxes, and insurance (PITI), monthly homeowner's dues are added for your qualification. These dues must be paid every month, are set by the Homeowner's Association based on operating expenses (insurance, water, landscaping, trash removal, etc.) and a fund to cover future repairs (roof, painting, road paving, windows, etc.) Should you fall behind in these payments, the Homeowner's Association can and will file a lien against your home. Depending on the amenities offered by your project (pool, tennis courts, bike trails, etc.), your homeowner's dues can vary widely from approximately $150.00 to $500.00 per month.
- Condominium : If the project is not yet 100% complete, you will need documentation from the developer regarding the complete plans for the entire project, percentages of owner occupied units versus investor owned units, and the projected date when the project will be turned over to the Homeowner's Association for control.
- Multi-Family : You will receive income from the other units in your new home which affects your debt-to-income ratio in a positive way. You will have income that should be calculated in your debt-to-income ratio for mortgage qualification purposes. A vacancy factor of around five per cent will be calculated, but the remainder of market value rent income will lower your effective mortgage payment.
- Multi-Family : Your appraisal cost will be quite a bit higher, around double the expense for a single family or condominium appraisal. Current rent amounts and market rent data must be analyzed to arrive at a fair market value (FMV) for the property.
- Multi-Family : Your mortgage file will need either copies of your prospective tenant's leases or “tenant-at-will” letters, which state that they live in the property on a month-to-month basis and verifying the rent amount they pay. This is the seller's responsibility, not yours, but you should be aware of this requirement and stay on top of your mortgage lender to obtain these documents in a timely fashion.
Your mortgage application file will contain this additional information if you are purchasing a condominium or multi-family home but all other information remains the same. The other important difference is your interest rate. You might find that your best rate is slightly higher than one you might find for a single family home. While the increase should not be significant, you should shop around to find the best terms available.