Friday, August 13, 2010

Affordability factor when buying your Chicago condo

When potential clients contact us to help them buy a home, the first thing we discuss is their budget. Most new buyers state what they are "pre-approved up to"... say $350,000. However, this does not necessarily determine the realistic price range we should be looking in. Your total monthly payment will determine the price range you should look in and will vary depending on many factors.

One must take into account condo assessments, taxes, insurance, and utilities.

Take these two real life condos we looked at recently with clients assuming 5% down payment, 5% mortgage interest rate while close in square footage and location:

Condo A:
$325,000 purchase price plus 462 assessment plus 4674 taxes equals about 2500/month payment.

Condo B:
$387,000 purchase price plus 150 assessment plus nearly same taxes of $4670 equals about 2500/mo.

The "affordability factor" here is the assessment. Condo A has an elevator, attached underground garage, and gas is included in assessment. It's a higher maintenance larger building due to better amenities and will always have a high assessment.

Condo B is a smaller building, walk-up condo with a detached garage spot, gas is not included in low assessment. Maintenance most likely will remain pretty low in cost compared to Condo A.

Despite the $50,000 difference in asking price, you pay the same monthly. So, if your budget is $2,500 a month you can actually look at a wide spread of asking prices accounting for assessment and taxes.

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