HOA fees and 100% Financing

I often get first-time buyers asking me about condos. My husband and I started out in a condo, and it's a wise choice for first-time buyers as well as older people who are downsizing. Condos tend to be in much better physical condition than houses in the lower ranges of the market as the HOA has to maintain it.

However, I do have to warn first-time buyers that the monthly HOA fee will have a real impact on their buying ability, and they shouldn't assume that they can afford a condo with the same price tag as a house. With 100% financing, every $50 of monthly fee will subtract about $9000 from their pre-approval amount for a house. So if an assn. has a monthly fee of $200, that means that a buyer who could afford a house at $350,000 can only go up to about $314,000.

First-time buyers should ask their lender about the effect of HOA fees on their buying ability, and they should ask their realtor to find out how much assn. fees are when looking at condos.