About to close on my first condo...and a few questions...

Starting Out
20yFollow

About to close on my first condo...and a few questions...

N/A N/A
Member since 2008 · 72 posts · 0 votes

Hey all,

Just wanted to let you know I'm about to close on my first Condo. It's about 10 mins south of downtown chicago. I'm about to close at 157k but the appraisal came back at 165k so I guess that's good.

Recent comps have come back at 180k for similar units (renovated) in the past 4 months, so since I only put 10% down and I'm doing a 80/10/10, I'm planning on refinancing after I make some renovations to capture that last 10% so I can lower my mortgage. Right now its 6.5 on 80% and 10 on 10%.

(1) Does a 6.0 on 80% seem reasonable?

Also, one thing that somewhat concerns me is that I'm trying to find average rental price for the building but I can't seem to find much except this one ad for a studio that shows up everywhere (on all the rental sites). It's the only high rise in the area so you would expect there to be plenty of data.

So I'm wondering...

(2) Does this mean it's good that there are so few rentals available? Meaning most people are homeowners and not investors? How do I check this?

(3) Maybe you are not allowed to rent? (I'm pretty sure this isn't true because I've met people in the building who rent, but maybe they are doing it illegally?)

Also, once this is done, I'm almost already looking forward to my next investment.

(4) Is it true once you start paying mortgage, generally your credit card line of credit increases? Because I will need that to pay for materials for renovations and have started to apply for those 12 month 0% apr cards...

(5) If you get a decent fixed rate 5.9-6.2 for 30 yr fixed, do you still try to slam every nickle into the mortgage or should you be content with being able to cover the mortgage and/or make slightly positive cash flow, and instead of pre-paying the mortgage, save your money for a new investment?

I just don't understand how you can even get financing for a second property if you are still paying mortgage on the 1st.

0Reply
19 views

4 Replies

Jump to latestLatest
  • N/A N/A
    Member since 2008 · 20 posts · 1 vote
    20y

    I don't know how close you are to closing, but some of these questions you should have been asking when you first put your offer in.

    Can you rent? You need to take a look at the Association Documents. They will list everything you can not due. Your purchase agreeement should have been subject to reviewal of these documents.

    Does 6% seem reasonable? it sounds ok, but I don't know what your credit score is, or what your income is. This is something that is a case by case basis, everyone is different.

    No comparable rents... This could mean a lot of things. You would know the area better than we would. Most places are rentable, sometimes you have to be more creative in how you advertise.

    Does your line of credit increase? if you have a line of credit, and you make a payment you have more available. But if you just finance a new property, generally it will be harder to get the next loan for a little while. Many lenders won't let you purchase more than 3 properties in a year, especially if you are just starting out.

    As for applying for new credit cards... I would hope your Realtor, or mortgage broker told you to WAIT UNTIL YOU CLOSE BEFORE YOU APPLY FOR ANY NEW CREDIT! I have seen deals fall apart because the person bought a truck, or got a new credit card.. This does affect you credit score, and ltv. SO WAIT UNTIL YOU CLOSE!

    0Reply
  • N/A N/A
    OP
    Member since 2008 · 72 posts · 0 votes
    20y

    When I said having yout credit line increase, I didn't mean that since you pay some of your debt off, your credit would increase. That's too straight forward. I meant maybe your normal line of credit is 3k but if you get a condo, your normal line of credit for credit cards would increase. Is that true? So now if those credit cards offering you 1-3k credit lines, they would now be offering maybe 5k+.

    0Reply
  • Jim & Michele Wilcox
    General Contractor · Scottsdale, AZ · Member since 2008 · 100 posts · 7 votes
    20y

    Don't most credit cards give credit limits related to your credit score. If you have a high credit score - you'll get a high credit limit and visa-versa.

    I agree with Jpopkin - some of your questions should have been asked and answered before offering a contract on the condo.

    Also - it scares me that you are trying to rent this condo with very little knowledge of what to expect. Make sure you have a percentage (usually 20%) set aside from your rent for overhead like when the condo isn't rented after a tenant leaves (unrented days), repairs, HOA dues, utilities you pay, condo assessments, etc. Then make sure there will be money left over to pay your mortgage.

    Just because you can rent for $1200 per month and your mortgage is $1000 - doesn't me you have $200 profit per month. There are lots of hidden expenses.

    Good luck though...

    0Reply
  • N/A N/A
    Member since 2008 · 20 posts · 1 vote
    20y

    No, your credit line will not increase. I tried expaining that your credit score will probably go down when you initially purchase. You now have new debt, and have not established it. Yes, Roanimare limits are centered around credit scores. I have seen someone with 800 credit scores have a building forclosed, and many credit cards closed his accounts even though he never missed a payment to them.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free