In this video, not only am I going to talk about how to buy a condo in this market, but also how to prepare and what is the process of buying a condo?
Welcome to my channel. If you’re a first time buyer and looking to buy or thinking about buying a house, you’re at the right channel. I bought my first house, which was my first condo almost 20 plus years ago. But this is a different market compared to 20 to 25 years ago. Things have changed. Loan processing has changed. The process of buying a home has changed and it has become more challenging. So you want to be very well prepared in buying a condo and want to make sure that you buy the right condo at the right place at the right price that you want. So let’s look into the process of buying a condo and how to prepare to buy a condo.
The first step in preparation to buy a condo is to know and be aware of your personal finances. You are thinking about getting into a big 30 years or 20 year commitment because you’re going to buy a house or a townhouse or a condo. You’re going to be stuck there for your payments for 30 years if it’s a 30 year loan. So you need to understand that your commitment is very high. And it’s a good commitment because you’re becoming a homeowner. You’re not paying rent anymore for somebody else. So knowing your finance is very important. Make sure you have enough funds for a down payment and I’ll talk about that later on.
This is the time to start thinking about your personal habits. When it comes to spending money, are you spending a lot of money? Are you throwing away money going into cinemas and dinners and concerts, et cetera? So maybe you want to look at that. You also have to start thinking about your saving. Are you saving enough money so you can buy a house or a condo in the next six months or the next year or in the next two years? So where can you save more? Where can you cut more? And do you have some savings right now that you can apply to your down payment? And what is the down payment? How much down payment do you need? And I’ll talk about that later on in the home buying process.
The second step in the home buying process is do you have an emergency fund when you buy a house? Of course. When you buy a house, you have the dilemma or the challenge of putting a down payment. I Totally understand. When I bought my first condo, I barely had enough down payment and my condo was only $120,000. I had a hard time coming up with $10,000 because I put almost 10% down. But these days you can put only 3% down. But getting back to that is that do you have an emergency fund after you buy the house, let’s say next year or two years down the road, and you’ve used all your savings for the down payment and the moving cost, do you have an emergency fund? I highly recommend that you start saving not only for your down payment, but for an emergency fund. Three to six months of living expenses, including your condo payment, your property taxes, your living, your grocery. If you have kids, you have clothing expenses, diaper expenses, or if you have parents staying with you, you might have additional cost. So always prepare for an emergency fund after you buy a house and after you’ve exhausted your down payment, which I totally understand. It is challenging, but it’s well worth buying a house or a condo.
The third step in your condo purchase is knowing what your limits are, not stretching to buy. How much can you afford? So usually the rule of thumb is that you need to have your payments no more than one third of your income. So in case you are making a $10,000 a month, for example, or $10,000 a month household income, you don’t want 33% of that going towards house payments because you have other expenses. You have a car payment, you have medical payments, you have groceries, you have utilities, cables. So you want to understand that, yes, you may want to buy a brand new condo or condo with a view condo that has pools and tennis courts and all kinds of things, but you may not be able to purchase that kind of condo. You don’t want to stretch it. So buy within your means. If your income is 10,000 and after talking to a lender, he may tell you, hey, you can only buy $300,000 condo or 500,000 a condo. So don’t stretch to buy more than you can afford because that’s the process of understanding your personal finances. Don’t overstretch buying. I’ve been selling homes for years and years and one of the biggest things people want is they want more house than they can afford.
The fourth step and very important step in purchasing a condo is to again review your personal finances and start saving towards your down payment and start cutting expenses at the same time. I’ll give an example. An average home today in USA cost about $420,000. An average condo today is about $368,000. So let’s say you decide, hey, you know what? I want to buy something for $368,000, which is an average condo in USA. And you want to put three and a half percent down, which is a special government loan, FHA loan. So in this case, you only need approximately $13,000 to save up for your down payment. Plus you must have additional emergency money, as we talked about.
So let’s take an example. Let’s say you want to buy a condo from a year from now, and you want to start the process and you need to save $13,000. So that is approximately $1,000 a month that you have to save. Yes, that’s a lot of money. But if you are working together, if you’re married, or if you get a part time job or do a side hustle, that is possible, or you might have already saved $7,000 and you need to save additional $5,000 or $6,000 to get to that $13,000, then. Now you only have to save 500 a month or 600 a month. And you may not be able to save it directly from your paycheck. But are there things you can cut back on? I’ll give an example. If you have lunch every day outside, on average, lunch cost, let’s say twelve to $15. So if you go for lunch 20 days a month, when you go to work, that’s 15 times 20. That’s almost $300 a month that you saved right away just by cutting up lunch. But imagine you go out for dinners with your friends in the weekends, on Fridays, or you go to concerts, or you are a shopaholic, or you like shopping, so you buy shoes. So if you just cut a little bit of things, and we were talking about saving $500 a month towards getting to additional $13,000 just by saving $150, $200 a month, and by savings from your paycheck or doing a side hustle of $300 to $400 a month, which is not a whole lot. Just like that, you have saved $7,000 in a year or additional money. So saving and cutting costs is a big step towards purchasing your condo.
One of the biggest things, in my opinion, in my experience, the biggest thing that stops people, homeowners, from buying a condo or a house is not that they don’t want to buy a house, but they feel they don’t have the down payment. Number one, it’s too high or they don’t have it. So to answer that question, number one, down payments are not very high. You don’t have to put 20% down. You can only put three and a half percent down. In this example I showed you for $368,000 condo. An average price condo, you need $13,000. So that’s not a lot of savings to make. There are other ways to save money or come up with the money. If you get, let’s say you overpaid your taxes or you had some expenses, when you get a refund or when you get a bonus, or if you do a side hustle, do some Uber driving in the weekends. You can easily come up with 100, 200, $400 a month. So there are ways to save money for your down payment. I hope you start that as a process towards your dream of owning a home or a condo.
The fifth step in preparing to buy a condo is to make sure that your credit is good or is better than average. A lot of the workers, a lot of the people have debts and the credit scores goes down. And when they go to buy a house, they find out, oops, my credit score is 550 or 620 or 650. So you can still get a loan with those numbers, but you will end up paying more cost and more interest rate. So in anticipation of buying a home six months up or one year up, check your credit. There are free credit sites out there and if it’s on the lower side, start preparing and improving your credit because the higher the credit score, the better the interest rate, which is very crucial. So instead of having a $500 payment just because you have a better credit, you might have a $475 a month payment which you could save $25 a month. Although there is no $500 a month payment. Those are for the cars. But on a home, if you have a $3,000 payment and if you end up paying $2,800 a month because you have better credit scores or credit scores near 800 or 780 or even 820, you can save 200 $300 a month just because you have a great credit score. So credit score is very important and it takes 2, 3, 4, 5, 6 months to improve your credit scores. So consult credit repair companies or direct message me so I can refer you to credit companies that I have worked with before or I have a network of nationwide credit repair companies.
And the 6th and final step to prepare to buy a house is to talk to a lender. So even if you are one year away or two year away, I highly recommend to my buyers and even to you is talk to a lender right now. They’ll be glad to talk to you over the phone. You don’t have to go there, you don’t have to show them the tax returns. But by talking to a lender, what we call getting a pre approval, they will ask you questions. How much do you make a month? Are you married? Do you want to buy together? What is your combined household income? What are your car payments? Do you have medical bills? Do you have student bills? Based on all the expenses, based on your income and based on how much down payment you want to put down, they will tell you, hey Mr. And Mrs. Buyer, you can buy a house for $600,000 if you put 10% down or you can buy 550 house if you put three and a half percent down. So once you talk to a lender, you will get an idea what you will qualify for.
Can I afford a $500,000 condo, a $700,000 condo or a 250 condo? And based on your qualification or anticipated qualifications and your income that you’ve told a lender, you can start preparing towards building that or buying that home. So getting an approval from a lender is a very key. And the earlier you do, the better it is for you. Even though you’re one year out or six months out or two years out, one of the best things you will do is talk to a lender. So you are very highly prepared in the right way. Knowing all your numbers, how much down payment you’re going to have to need, what your credit score is right now, what is going to be six months down the road and how much down payment you’re going to have saved up. So very key role in preparing to buy a condo.
Now that we have talked about the process and understanding what it takes to buy a house, let’s talk about the steps in actually buying a house. Like talking to a lender. So by the way, thanks for watching my channel. I’m Mike Patel and if you can subscribe and hit that alert button I would really appreciate it. I come up with videos like this every week.
So now that you’re ready to buy a house in the next two, three months or five months, the first step is find a realtor. And in this case for condos, it’s important that you find the right condo because buying a condo or purchasing a condo is different than buying a house. Condos have association fees and other features that don’t come when you purchase a home. So finding the right realtor, talking to them and see if they have experience in buying and selling condos, if they have experience in the neighborhood that you’re looking for. What’s happening with the condo communities in your neighborhood, what are the upcoming trends in selling and buying condos? It’s important that you find the right agent and with my nationwide network of realtors not only selling condos, but selling condos with FHA loans and first time home buyer loans. I can refer you to one. Just direct message me and I’ll be glad to do that for you.
The second step is once you find a realtor, just like a lender, they’ll ask you what kind of condo do you want? Do you want something newer? Do you want something older? Are you looking for a newer with more amenities like pools, tennis courts, gated communities? You want a clubhouse or you want condos near a railroad station or a transportation? Or you like condos in more of a private areas? Or you don’t mind getting an older condo as long as there’s more space because you are a bigger family. So you would rather have buy something older and bigger, which may be cheaper than buying something newer and smaller. So all these things you need to talk to your realtor, the specific areas you want, the amenities you want. Is parking important to you? You may be a family of four or five and you might have three cars. And a lot of condos have restrictions in parking or they might just have two spots. So what will you do if you have three cars or four cars or you have a lot of family come over in the evenings or weekends and you need ample parking. So are there extra parking? So all these little things which affects not only the way you live, but affects your lifestyle and your families in the weekends, et cetera, it’s important that you talk to your realtor, explain to them they know all these things. They expect you to tell them these things and based on their experience and knowledge and selling condos in the area, they can pinpoint areas and certain communities that you’re looking for in your price range. So that second step is also very important along with finding a great agent in your neighborhood.
Third step, once you know what you want, where you want, and the price range you want, is to start searching your homes, not only online, but maybe in the weekends. Drive by the communities, drive by the neighborhoods, and once you pinpoint, your realtor can take, you can pick four or five condos on a Saturday or Sunday or even during weekdays and take you out and see those condos. Once you see the condos that’s in your price range in your neighborhood, and it fits the amenities not only inside the townhouse but also outside the condos, then your realtor can help you make an offer, a reasonable offer with reasonable terms. And if your offer is accepted, they will accept it and tell you hey, your offer is accepted or they may counter you back and say, hey, I like your price, but I don’t like this and this and that. And your realtor can help you with that. So that’s the third step in searching your home and making an offer.
The next step, once you open escrow, is immediately start your home inspection. Have the inspection done inside. Your realtor can help you with hiring a professional inspector. They go through everything inside the condominium, and if there’s any issues, they can let you know in a written format. And if you want something fixed or something addressed, you guys can talk to the seller and see if he can fix those issues or give you credit for those issues. So the other things you can do while you’re in escrow, and of course, while you’re in escrow, you have limited time to do your contingencies, your checkups, your inspections. Typically, at least in California, a typical escrow period is about 30 days, and usually within the first 17 days, they give us time to remove all contingencies, getting a loan approval and all that. So while you have the time, along with your inspection and title search, you want to make sure that your realtor gets you the CCNRs, which are the covenants, conditions and restrictions. These are the rules and regulations of condominiums. You want to go through that. There’ll be lots and lots and lots of pages. You probably won’t read them, but go through them, make sure you understand them. You also may want to check to see if you can get the minutes of the boards. They have meetings every month, and you want to look at the minutes to make sure what’s coming up in the future. What’s happening? Are they going to be fixing the roofs, which are old? Are they going to fix the patios? Are they going to do new lights? What’s coming up? What is your homeowners association fees every month? And if they do repairs or do remodel with the new windows or they change the pool and make it newer, then that’s going to add to your association fees. So look into those things before you close and within those time periods.
So the next step is very simple and very exciting. Once the inspections are done, appraisal is done, the title search and you have satisfied all the conditions and terms that you requested from the seller, you are ready to close. So a few days before the close of escrow, your lender will let you know. Hey, Mr. And Mrs. Buyer, you’re going to need this much money transferred to the escrow account. So have that money ready. And once you transfer, you can close escrow and have the condo transferred to your name as the new home. Proud buyers.
So congratulations, by the way. I did a video just last week. Check it out. It’s called condo versus buyer. What is better for you? Should you buy a condo or a house? What’s the difference? Please check it out.