If you are considering buying a townhome or condominium don't forget to consider the cost of HOA (homeowner association) fees as well as the purchase price when calculating your monthly payments. When qualifying for a mortgage, HOA dues are added to monthly loan and tax payments to get your qualifying monthly payment. Including those fees means you will qualify for a lower priced townhouse or condo than a house.
Association fees vary, but are usually highest for condos and typically the higher the association fees the more coverage. For instance in townhomes your assocation fees usually include trash removal, snow/lawn care, exterior maintenance, hazard insurance, sometimes water/sewer… and in a condo your fees could also include heat, sometimes even air conditioning and cable.
It is important to keep in mind, however, that you will be personally responsible for items covered by association dues when you own a house… those costs just aren't factored into your qualifying expenses. In a house you are responsible for everything associated with the house so if the siding needs to be replaced you must pay for it yourself… in most associations it would be covered by the HOA. In a CIC (Common Interest Community) the monthly fees you pay go towards services provided by the association as well as capital improvements/maintenance so you aren't as likely to have as many surprises.
When association fees are higher or lower than that of comparable complexes first check to see what is covered… are fees covering more or fewer services than in other complexes? Also check to see if the association has adequate reserves for repair/replacement costs… are they making up for inadequate reserves in the past? for special assessments because of needed repairs with inadequate reserve funds?
Coops may have fees that are higher still… often because they may also include a common mortgage for the whole property. In a coop you own a share in a corporation that owns real estate rather than owning the real estate itself.
Sharlene Hensrud, RE/MAX Results – Email – Minneapolis Condo Realtor
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