Written By: Daniel Garcia
I recently was asked by one of my students if condo assessments were ever included in the mortgage payment. I thought this was a good question. Simply because the answer is two-fold.
First, if you don’t already know what condo assessments are, here is the definition: Condo assessments, sometimes called association fees, are the payments made by condominium owners to cover the common expenses of the entire property. These payments are usually made monthly to the condo association. The expenses the condominium assessments cover typically include, but are not limited to:
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• Sewer
• Water
• Trash Services
• Electricity for common areas
• Insurance for common areas
• Lawn cutting
• Snow removal
• Hallway cleaning
• Parking lot maintenance
• Professional management
• Long- and short-term replacement reserve
These assessments are typically calculated on the percentage of ownership in the building, meaning the overall size of the condo. For example, a typical two bedroom condo has more square footage than a one bedroom condo in the same complex. Therefore the owner of the two bedroom condo is charged a larger monthly assessment fee. Condo assessments will vary from property to property because they often cover different expenses.
So condo assessments work very similar to homeowners’ association fees. When qualifying for a mortgage, they are also treated the same. That means, although they aren’t apart of the actual mortgage payment, they will be included in the DTI ultimately affecting the qualification of the borrower.
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In short, just remember, if you are processing a mortgage for a condo purchase, make sure you include the assessment fees in the ratios. This does affect the client’s affordability.
Stay tuned until next week. Make it a great one!
About The Author
Daniel Garcia - As an NAMP® staff writer, Daniel Garcia is a loan processing instructor for Loan Processor University (www.LoanProcessorTraining.org). Daniel also currently works for a non-profit housing and community development corporation where he serves as a senior loan officer and heads up the organization’s homebuyer education program. Daniel provides consultation services to other non-profit housing organizations nationwide, training in the areas of mortgage qualification and processing, state and federal laws, adult education training methods, and credit/foreclosure intervention counseling and program setup. He has gained a variety of experience, from mortgage processing and loan originating to loan servicing and loss mitigation. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.
