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Going to Buy a Condo? Here's What You Need to Know

4 questions you should ask before closing the deal

Is the building approved for FHA loans?

Ask the condominium manager if the building has been approved for Federal Housing Administration loans. If not, you should strongly consider another condo development because you'll most likely have difficulty getting a mortgage for any unit in that building.

Many lenders simply won't touch condominiums that are not on the FHA's approved list of condos. This is something you want to know about early in your house hunting — not after you've fallen in love with a property.

"We've had customers who have put down big down payments of $30,000 or more on condos, and then they can't get approved because the project isn't approved," says Thasunda Brown Duckett, senior vice president and Northeast region manager for Chase Mortgage, a division of JPMorgan Chase.

In some of these cases, Duckett says, buyers could lose their down payment. Duckett suggests that, before you hand over a down payment for a condo, double-check with your lender to confirm that the property you're interested in is on that bank's approved condo list. Also, in your purchase agreement, include a mortgage contingency clause stating the deal is only valid if you can get a mortgage and your bank approves the condo association and property.

What are the restrictions and limitations associated with the unit?

From parking rules to community and grounds access, make sure you fully understand what types of restrictions and limitations you are subject to as a condo owner. The condo unit is governed by a declaration and certain rules listed in the title documents.

You can review these documents on your own, or have a buyer's agent go over them with you so that you know exactly what to expect. You should also know how often and under what circumstances various condo association fees can be imposed or increased — with or without warning.

Next: Why occupancy rate matters. >>

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