3 Ways to Finance Your Winter Condo Purchase
Arriving at the time in your life when you’re ready to buy a winter home is liberating. You can finally live the best of both worlds — enjoying time with your loved ones and the beauty of your hometown in the spring and summer, and then escaping to warmer, sunnier skies during the winter season.
Condos are popular choices for a second home, because moving into a winter condo means less maintenance to worry about, as the HOA will likely handle most of the dizzying matters like replacing plumbing and fixing roof leaks. Once you’ve found the perfect spot to spend your winters, it’s time to plan how you’ll finance the purchase.
The help of a financial advisor such as a mortgage agent or accountant will be beneficial, especially if you haven’t financed a home in many years.
No matter your needs, it is possible to navigate the waters of condo-buying successfully and find a loan to meet your needs. Here’s what you need to know about your three main options: VA loans, FHA loans, and conventional loans.
VA Loans
If you’ve ever served in the armed forces, or had a spouse who died in active duty, a VA loan is often the right option for your financing needs.
This type of loan, backed by the Department of Veterans Affairs, has low upfront costs and in some cases, lower interest rates. In order to qualify for this loan, you must choose a condo that has been pre-approved for VA financing, but that doesn’t mean options are limited.
There are plenty of properties that have applied and been approved for VA financing, and you can search for them online using the Veterans Information Portal.
Who Qualifies
Most current members of the military qualify for VA loans, as well as veterans, reservists and National Guard members.
As a veteran, you won’t have to worry about the waiting periods that are assigned to active duty members and National Guard.
If you don’t have a certificate of eligibility, your loan officer can usually obtain this for you throughout the application process.
Advantages
One of the primary benefits of a VA loan is that you are not required to have a down payment. You’re also free of mortgage insurance, which is usually required for borrowers who put down less than 20%.
Finally, you have Veteran Affairs at your disposal when you get a VA loan. If you have a question or concern that your lender can’t remedy, you can contact the VA for help.
FHA Loans
FHA loans are backed by the Federal Housing Administration (FHA). This means that the FHA essentially promises lenders that if you default on your loan, the FHA will pay the lender back.
Because of this, lenders are often more willing to offer a loan to a buyer with less than perfect credit, or one who doesn’t have a huge down payment. With an FHA loan, you can contribute a down payment of as little as 3.5% and save more cash for home improvements or a rainy-day fund.
Who Qualifies
Most people will qualify for an FHA loan. Thanks to the government backing, even people with a credit score in the 500s may be able to get a loan, albeit with a higher interest rate.
There are also no minimum income requirements. Much like with a VA loan, the condo you buy must be in a complex that is approved for this type of loan.
For instance, if most of the units in the complex are not owner occupied, your loan may be denied.
Advantages
An FHA loan has several clear advantages. Your credit and income are not scrutinized as much as with a conventional loan, and you don’t have to submit a large down payment.
With an FHA loan, your closing costs may even be covered. If you have your eyes on a condo in need of repairs, you can apply for a special kind of FHA loan called the 203(k).
This type of loan lends cash based on the value of the property after the repairs are complete.
Conventional Loans
Conventional loans are the most conservative of the three options, so you should expect to offer the standard 20% down payment (or more) in order to qualify.
You can also expect to pay closing fees. On the other hand, you won’t have to jump over some of the hurdles posed by FHA loans and VA loans, which can mean a faster closing and less time in limbo between properties.
If you have relatively little debt and an accumulation of cash from selling another property, a conventional loan may be your best bet for buying a condo.
Who Qualifies
In order to use a conventional loan, you will need a good credit score (at least 620) and low debt-to-income ratio.
Because you’re buying a condo, the lender may look at details like how many of the HOA dues are paid on time within the complex, and whether any special assessments are on the horizon.
Despite these considerations, you will have more choices for your new condo because a complex doesn’t have to be specifically approved for this type of lending.
Advantages
Because a conventional loan has fewer outside obstacles than a VA or FHA loan, you and your lender will likely be able to close the loan pretty quickly.
If you’re looking to move quickly, a conventional loan is the answer for you. You can also use conventional lending on brand new condos.
Using one of the government-backed loans (VA or FHA) on a new build may be more difficult because the property won’t have had to time to be pre-approved for special lending.
When you’re ready to buy a second home to escape the cold winters of your hometown, financing a new condo can take a few different paths.
After assessing your down payment fund and how quickly you want to close, the right choice will reveal itself.
Once your loan is approved, you can move on to the fun part of purchasing a new condo — decorating and making plans to sip coffee in your new picture window, or on the back patio.
Contributed by: Aderra Condominiums’ sales are headed by Melanie Sanders of RE/MAX Platinum Living. Melanie comes with 25 years of experience as an Associate Broker/Team Leader, specializing in New Homes and Model Home Sales. Melanie was the former Vice President and Designated Broker of DR Horton and Ryland Homes, running sales and marketing. Melanie and her team have the knowledge, experience and friendly attitude required to manage all aspects of sales at Aderra.
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Category: Housing
