Month: April 2018

If You Have a Mortgage, You’ll Need Condo Insurance

When you buy a condo, you might be wondering if condo insurance is mandatory. It’s not an apartment, so you don’t have to pay renters insurance, right? That’s correct. And it’s not a house, so you don’t have to get a homeowners insurance policy, right? Not quite.

If you have a mortgage on the condo, a condo insurance policy will be mandatory. Your lender will require you to insure the property — just as if it were a single family home — in the event something happens to the condo while you’re making payments. Getting this insurance is part of the financing process and can also be included in your overall closing costs.

Understanding the Types of Condo Insurance

First, let’s review the insurance policies the condo association has in place. Much like a homeowners association, your condo association is responsible for the building as a whole, the interior common areas, the financial well-being of the association, and many other things.

The association’s bylaws, or rules that cover how the association is managed, is where you should start. Review your association’s policy as well as its master policy to determine what the association is responsible for insuring and what they require you to insure.

The association itself may have one of these common insurance policies in place, which determines the level of coverage you need to get:

• All-in: Everything is covered — the building, common areas, interior surfaces and fixtures, and even parts of the unit that you upgrade yourself
• Single entity: Everything is covered except for any unit upgrades and improvements you make as well as your personal property.
• Bare walls: Only the building’s basics are covered, such as walls, roof, floors, etc. You’d be responsible for insuring the interior as well as your personal belongings.

Now that you know what the association covers, you can begin to determine what condo insurance you’ll need. Here are some considerations for your condo insurance policy:

• What are you responsible for covering apart from the association master policy?
• If your condo’s interior isn’t fully covered, how much would you need for repairs?
• If you make improvements that aren’t covered, how much do you need for replacements?
• Assess the value of your personal property. How much coverage do you need?
• If someone was injured on your property, how much do you need for liability?
• If your condo were made uninhabitable, how much would you need for living expenses?

These are important things to consider and discuss with a licensed insurance agent. Share the association’s master policy with your agent to ensure there are no gaps in coverage and that they can tailor the right policy for your needs.

Learn more about buying a condo in Chicago. Follow our blog for the latest news and tips.

What Does Your Association Allow?

Buying a condo isn’t quite like buying a single family home. The latter allows you to do just about anything you want: tear walls down, put walls up, run new water lines, run new gas lines, and more. The opportunities are endless.

But when it comes to a condo, keep in mind that you’re not the only resident in the building. Your walls are essentially your neighbor’s walls. Your floors may be your neighbor’s ceiling (and vice versa). And removing or altering something without talking to your condo association first can have serious — and potentially costly — consequences.

Protecting yourself and your neighbors is as easy as having a conversation with the condo association. Call them up, and just ask. Talk through what you want to do.

If your condo is new construction, there’s probably not a lot of customizing that you need to do. The flooring, paint, layout, and finishings are virtually untouched. You may have even been a part of selecting them if the designers or builders offered that service.

But if the condo has been around a while, or if there’s just more customization that you want to add, it’s critical that you talk to the condo association first and explain what you want to do. Also, refer to your association rules and regulations for specific details about condo customization.

While you probably won’t need association approval for small changes like new fixtures or painting a wall, but changes that modify the structural layout of the condo or require changes to plumbing or electricity will because they may impact other residents. The association may also require the contractor you want to work with to be reviewed to ensure they’re properly licensed and insured.

Why It’s Important to Talk to Your Association

If you moved forward with customizing your condo yourself, or if you worked with an unlicensed, uninsured contractor, you could find yourself in a bad spot if something were to go wrong.

Say you remove a wall to make a certain space more open. It looks more contemporary, the room gets more light, and you feel comfy and cozy in an open space. That’s great, but you neglected to consider why that wall was there. Now, your ceiling has a crack from end to end, and the floor in the unit above you is sinking.

You now have to move out while the damage is repaired (along with your upstairs neighbor), and because you didn’t work with an insured contractor, guess who’s footing the bill? Yep, you.

Thankfully, most high-end condos will work with you to customize the condo’s interiors to your liking. So apart from hanging art, decorating, and perhaps painting a wall down the road, there shouldn’t be much you need to do.

OK, OK — If You Still Want to Customize, Start Here

We understand — tastes, styles, and trends change. So if the time comes to customize your condo, follow these instructions to make sure you do things right.

Assuming you’ve already talked everything through with your association and received their blessing, you can start searching for a reputable, licensed, and insured contractor. There are quite a few out there, so you shouldn’t have any trouble identifying solid candidates.

Get recommendations from family and friends. Read as many reviews as you can, particularly reviews on third party and consumer advocate sites. Look for photos of their work, and search for any complaints against them. Keep in mind that one or two complaints but hundreds of positive reviews doesn’t mean they should be disqualified from the running. Check the complaints and weigh them against their context and the overall impression others have had working with them.

And don’t go straight for the lowest-bidding contractor. Experience, reviews, communication, and responsiveness all count and can make the difference between a successful remodel and a very uncomfortable, unsightly one. If a mid-range or higher-end contractor can do the work better or faster, it may be worth considering.

Next, make sure they’re licensed and insured. Don’t waste time explaining your condo remodeling project and getting estimates if they’re not legally permitted to do the work. Research a few contractors, let them know you’re interested in a remodel and ask about their licensing. Ask to see or receive their certificates and licenses. An ethical contractor should be more than willing to assist.

Once you’ve received their licenses and bid and have selected a contractor, review them with the condo association. As we mentioned earlier, you’ll likely have to get the plans, bids, and contractor details reviewed and approved. Navigate this process and provide the association with any additional information they require.

Once the association has approved, your contractor can get to work. Stay in touch with your contractor often so you can stay apprised of progress and make adjustments as necessary. Do your part to be available to your contractor as well so you can make decisions on any questions or problems as they arise. Communicating well together and being available will keep your remodel on track toward success.

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Understanding What Condo Closing Costs Are

Getting ready to close on a condo? Or just getting started? This is a big purchase, so it’s critical that you understand the costs you’re responsible for. But first, just what exactly are closing costs?

Condo closing costs are fees that are charged for obtaining a mortgage. While you can include your down payment in total closing costs, there are additional fees that you must pay (we’ll cover those shortly). First, let’s review what will be your largest fee: the down payment.

A down payment is money that you provide during a real estate transaction. The down payment is a percentage of the property’s sale price. So, for a $500,000 condo, a 20% down payment is $100,000, a 10% down payment is $50,000, and so on. While there is essentially no limit to the size of the down payment you make, there are minimum requirements.

Depending on your loan program, you may be required to put anywhere from 0% to 20% or more down. Veterans and qualifying service members can take advantage of a VA loan with no down payment requirement (the condo must on their approved list, however). First-time buyers can use an FHA home loan with only 3.5% down required (again, the condo must be approved).

The overall loan amount also factors in. In certain high-cost areas, such as downtown Chicago, a higher down payment may be required since your loan amount may exceed the conforming loan limit. Also, note that putting less than 20% down will result in mortgage insurance — an additional fee added to your monthly payment.

Additional Condo Closing Costs

Beyond the down payment, you’ll also have to pay other fees that are charged as part of the mortgage process. Some lenders may offer credits for some of these fees as specials or waive them entirely, but that depends on the lender. Examples of these closing costs include an application fee, processing fee, origination fee, and underwriting fee.

Additional condo closing costs include homeowners insurance, attorney fees, title fees and title insurance, municipal fees, credit report fees, discount points, and recording fees. Fee amounts will vary depending on where you’re moving, what mortgage company you financed the condo with, the attorney you’re working with, and so on.

You’ll also have to pay City of Chicago Transfer Tax, which is $7.50 per $1,000 of the real estate transaction. On a $500,000 condo, this tax would be $3,750.

Know the Condo Closing Costs You’ll Pay

Part of the loan process includes two documents: 1) a Loan Estimate (LE) and 2) a Closing Disclosure (CD). Within three days of applying for a mortgage, a lender is required to provide you with the LE — a good faith estimate of your interest rate and closing costs. Within three days of closing on your condo, you’ll receive the CD, which details the final costs you’re required to pay.

Compare these two documents closely. The rate and closing costs should not have changed significantly. While some closing costs can change without limit, others can only change by 10% — or not at all. If the closing costs on the CD exceed the costs on the LE beyond acceptable limits, your lender has to refund the excess to you within 60 days of closing on your condo.

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Why Condo Walk-Throughs are Important

Why indeed! You’ve already found the perfect condo in the perfect neighborhood. It’s close to your office, it’s close to your favorite shopping, and it’s close to some of Chicago’s best nightlife. The interior was beautifully updated, the lobby and hallways are kept clean, and the neighbors seem nice. So why would you bother with a final condo walk-through?

It might seem excessive. It might even annoy the seller and his or her agent. But doing a condo walk-through is important for many reasons:

• You’re paying hard-earned money. At the risk of sounding parental, it’s important to understand the value of money. You work hard, and you’ll only earn what you earn during your window of employment. So don’t waste it. Downtown Chicago condos aren’t inexpensive, and you deserve to get what you’re paying for.
• You could’ve missed something. When you first toured the condo, you probably focused on its great location, the contemporary finishings and features, the association’s amazing amenities, and more. But you could’ve missed something. Maybe an indistinguishable leak has become a rust-colored wall stain. Maybe it was warm out when you toured and missed a window gap that’ll have you freezing (and losing money on heating) this coming winter.
• Holding sellers accountable. Wear and tear is a part of life. Homes get old, and things need updating. That’s perfectly normal. It’s also perfectly normal to negotiate repairs into a purchase contract. For example, say some drywall is damaged. You could require the seller to repair the drywall before closing. And if it isn’t, you could withhold a portion of the seller’s proceeds until it gets fixed.

What to Check During a Walk-Through

• Is the home clean? Has the seller removed their belongings?
• Are the items you’ve negotiated for present?
• Have the repairs you’ve requested been completed?
• Are invoices and warranties for any requested repairs available?
• Is there any visible damage, mold, leaks, or pest problems?
• Are all appliances clean and fully functional?
• Do all switches and outlets work?
• Are any electrical plate covers missing or damaged? Any exposed wires?
• Are the doorbell, garage door, exhaust fans, and ceiling fans functional?
• Do the heating and cooling systems function? Is the thermostat working?
• Do toilets flush? Tubs/showers drain? Sinks drain?
• Is the water running with proper pressure?
• Are faucets and showerheads working? Any leaks?
• Do all windows and doors open, shut, and lock properly?
• Is there any condensation or fogging on double-pane windows?
• Are there any missing panes or screens?

What to Do If Something is Wrong

If you find a problem when doing a condo walk-through, you can delay closing on your condo by negotiating a holdback, which is when a portion of the seller’s proceeds are withheld while they complete repairs. If something significant arises that changes your decision to purchase the home, you have the option of walking away.

However, before you take action, consult your real estate agent and attorney to determine the best course of action.

Get other valuable insights into Chicago condo living. Follow our blog here.

Chicago is a Great Place to Live, Work, and Play

Buying a condo or townhome in Chicago not only gives you access to extensive professional opportunities, exciting nightlife, and a legendary food scene, but it also makes you part of a historic (and ever-growing) community.

From the bars and boutiques of Old Town to the hustle and bustle of The Loop, wherever you decide to call home in Chicago is sure to combine the best of home, office, and entertainment.

So how can you go about buying a condo in Chicago? Sure, it can be a complex process just like buying a single family home, but as with any home purchase, the result is worth it. Let’s review the steps needed to buy a condo in Chicago.

Get Pre-Approved for Financing

You might be tempted to contact an agent right away, but getting pre-approved by a lender can actually save you a lot of time and hassle upfront.

If you’ve already done some research, you might think getting pre-approved is a hassle. However, gathering information early allows your lender to determine the loan amount you qualify for. And once you’re pre-approved, you’ll have a letter that you can use in negotiation with a seller to show that you’re ready and able to purchase the condo.

Here’s a quick overview of the documents you’ll need:

1. Photo ID and Social Security card
2. W-2s for the past two years
3. Tax returns for the past two years
4. Bank/asset statements for the most recent two months
5. Pay stubs for the past 30 days

While additional documents may be required, particularly for self-employed borrowers or if you’ve had any recent credit events, getting this information ready for your lender will save a lot of time.

Make Sure the Condo is Approved

Getting a mortgage for a condo requires that the condo be on an approved list, such as for FHA and VA loans, or for the condo to undergo a review by the lender, such as for conventional loans.

For FHA and VA loans, you can get a head start to determine whether your condo is eligible for that loan type. Search FHA approved condos here, and VA approved condos here.

Condo lists for conventional mortgages aren’t extensive, but that doesn’t mean you can’t buy a condo with a conventional mortgage. Your lender needs to conduct a limited review, which involves sending the condo association some paperwork to fill out. The lender will review it, and if everything looks good, you’ll be all set.

Proceed with Final Steps

Once you’re pre-approved and have signed a purchase contract, you’ll return it to the lender and complete the loan approval process. The lender will verify the information in your application and submit the loan to an underwriter for final review.

If the underwriter requires additional information or explanations, you’ll be informed and should do your best to address these requests (called “conditions”) as quickly as possible so that your loan can proceed. Once conditions are cleared, your loan will be approved, and you’ll have the clear to close.

An escrow account will be set up to transfer funds between you and the seller. Your lender will also set up an escrow account for the distribution of fees like taxes and insurance. Condo association dues likely won’t be paid through an escrow account.

When the time comes to close on your condo, you’ll attend a meeting along with your agent, attorney, title agent, and any seller-side representatives. Be prepared for a long meeting. If you have any questions, let your agent and attorney know. They’re there to help you.

You’ll review your final Closing Disclosure and verify that everything looks accurate. You’ll sign a lot of paperwork and pay closing costs. When the loan funds, you’ll receive your keys to your new Chicago condo.

Ready to find your dream home? Contact our preferred lender today.

Buying a Condo in Chicago?

You’ve made a great decision. Chicago is a city rich with history, adventure, and culture. The food scene, nightlife, professional opportunities, and more are no more than a walk or quick Uber ride away. (The real estate is booming, too!) We love living here, and we think you will, too.

Buying a condo can be a complex process, particularly as there are more rules, considerations, and steps for financing a condo versus a single family home. But as long as the condo qualified for your loan program and you followed your lender’s approval process, you should be all set.

So, what now? It’s time to start preparing to close on your condo! You’ll have an escrow account set up by a third party to handle the transfer of funds between you as the buyer and the current owner. You’ll also have an escrow account set up by your lender for the distribution of fees like taxes and insurance. Fees such as condo association dues likely won’t be paid through escrow.

When your closing date comes, you’ll attend the meeting along with your agent/broker, attorney, title agent, and any representatives from the seller’s side (and perhaps the seller, too). Don’t let this stress you out. While closings can take anywhere up to a couple of hours, your agent and attorney are there to answer any questions you have.

Remember to be thorough. Make sure the paperwork matches your final Closing Disclosure (CD) and that everything looks accurate. You’ll be handed a lot of paperwork, sign your signature until your hand is sore, and pay your closing costs.

When your condo closing is complete and the loan funds, you’ll receive your keys — making everything that came before that moment 100% worth it.

Make Sure You Do a Final Walk-Through Before Closing on Your Condo

Sure, some people might think a pre-closing walk-through is overkill — except you when the heavy rain that fell the night before closing revealed a serious leak that damaged half the wall in your living room. Glad you did that walk-through, aren’t you?

Doing a walk-through before closing on your condo might seem like a tedious step in an already long process, but it’s worth it. Identifying any issues before you finalize the loan could mean the difference between enjoyable, problem-free living and a stressful, extensive repair process.

Granted, most major issues are the responsibility of the association to resolve, but a pre-closing walk-through goes deeper. Have the repairs and fixes you negotiated with the seller been completed? Is the unit empty? Are other issues like floor damage revealed now that the seller has moved out? Get even more granular. Do the appliances work? Do the systems (HVAC, plumbing, etc.) work properly? Are there any signs of pests?

Ultimately, if there is a serious problem, you can delay your condo closing by negotiating a holdback, in which a portion of the seller’s proceeds are withheld pending the completion of repairs. However, you should consult with your attorney before taking action.

Here’s What You Should Expect for Condo Closing Costs

All right! You’ve found a home and performed a final walk-through. Everything looks good — the changes you requested have been made, the property is clean and empty. Closing day is almost here, so it’s time to get your closing costs squared away.

It’s important to understand what closing costs are. It’s a broad term that comprises a variety of charges pertaining to your purchase. It’s fair to include your down payment in the overall term “closing costs,” but be aware that closing costs are charged in addition to your down payment.

Depending on the mortgage program you chose, this can be anywhere from 0% up to however much you feel comfortable (and are capable of) putting down. (Note that lower down payment programs like FHA and VA require the condo to be on an approved list. If it’s not, you’ll likely have to get a conventional mortgage.) The loan amount also factors in. In certain high-cost areas, such as downtown Chicago, a higher down payment may be required since your loan amount may exceed the conforming loan limit.

Additional closing costs include homeowners insurance, attorney fees, application fees, underwriting fees, title fees and title insurance, municipal fees, recording fees, loan origination fees, etc. These fees will vary depending on where you’re moving, what mortgage company you financed the condo with, the attorney you’re working with, and so on.

The Condo is Now Yours — Time to Really Make It Yours

But before you do anything, you need to understand your condo association’s rules and requirements as well as what your obligations are when it comes to customization.

Now, if you’ve purchased a condo, there’s a good chance the previous owners put some elbow grease in to update its features and make it more marketable. If it’s a new construction condo, you shouldn’t need to do anything — you may have even had a say in the interior design.

That said, if the condo still needs some updates or personalization, your first step is to consult the condo association. Small things like installing a new faucet on your kitchen sink or painting a wall most likely won’t require association approval.

But anything that affects plumbing, electricity, or structural layout of a unit will require association review since any mishaps could affect other residents’ units. They’ll also want to review the contractor you’re working with to ensure they’re properly licensed and insured.

The consequences of going rogue could be steep. If you or an uninsured contractor (say, your buddy’s brother’s friend’s cousin who does remodeling on the side) made structural alterations that resulted in floor and wall cracks in the units above you, there’s a good chance the association would hold you financially responsible.

Bottom line: When it comes to your condo, it is far better to ask permission than beg for forgiveness — particularly when forgiveness means a hefty fine or legal action.

Condo Insurance: What’s Covered and What’s Not

You’ve heard about homeowners insurance. But what about condo insurance? Are they the same? Is condo insurance even required? If you have a mortgage on your condo, then yes, condo insurance is required. This is to protect the lender behind your mortgage in the event anything happens to the property (as well as you).

But the level of coverage as well as what you’re responsible for covering can vary by complex and according to your condo association’s policy. So, it’s important to start there. Review the association’s policy to identify what you’re responsible for covering.

For example, most associations will have something called a Masters Policy. This will specify what is covered by the association and what you need to cover. Things you’ll typically be responsible for covering are contents (valuables, furniture, etc.) and structure (flooring, fixtures, countertops, etc.). You may also need to add other coverages into the policy you get in the event the association policy doesn’t include them — coverages like wind, flooding, etc.

It’s Moving Day — Take These Steps for a Stress-Free Move

Ready to move into your condo? Of course you are! You’ve accomplished so much up to this point, and it has to feel amazing knowing that your new home is waiting for you.

There’s just one more task, but it’s a big one: moving. The earlier you start, the more prepared you’ll be when the big day comes. That’s why it’s critical to make yourself a moving binder in which you’ll keep important details and notes. The first thing that you should include is a moving checklist.

Also, you’ll likely be finalizing your mortgage during this process, so even though we specify times when you should be doing something, feel free to adjust depending on the progress of your loan.

About two months before you move, start clearing out what you don’t need or can’t take with you. Sell or donate old items, and start whittling down your perishable foods. Also, start researching moving companies if you’ll be using one.

One month out, pick a moving company and secure their services. Start gathering moving supplies, and notify utility companies of service cancellations or changes. If you are traveling a long distance, make sure your vehicle is in good shape and that you have an itinerary with important addresses and details prepared.

One to two weeks before moving, change your address with the USPS and confirm dates with your movers. Begin packing, too. Group similar items together, color code and label boxes neatly and in a detailed manner, and clean rooms thoroughly as they become empty.

When you move, remember to be flexible. There will undoubtedly be complications that arise but address them one at a time. Remember to have some essentials handy in case things take longer than expected — extra clothes, hygienic supplies, etc.

When the move is complete, and you’re all unpacked, be sure to throw an epic housewarming party. Invite your friends and family, and even your new neighbors if you’re comfortable doing so.

Your Condo is Yours Now, So Take Good Care of It

It’s done. It’s finally done! You’ve purchased a condo and have moved in. Well done. We know it was a detailed process, but your new home is entirely worth it. Now that you’re settled, we have a few tips for maintaining your condo, so it retains its value, and you remain a good neighbor and resident throughout your stay.

• Clean thoroughly. It’s fine to give your condo a once-over on a weekly basis, but you should deep clean at least once a month. This means wiping off air registers, vacuuming under furniture (especially if you have pets), wiping off baseboards, cleaning windows and glass doors, and cleaning out appliance interiors.
• Check appliances. If your condo came fully furnished, you are responsible for the proper maintenance of those appliances. Make sure they’re in good working order, keep them clean, check their plugs, and verify any settings. Also be sure to check and test your smoke and carbon monoxide detectors.
• Check for pests. From bugs to rodents, even a small pest problem can quickly become a large problem. Check for droppings, nests, webs, etc. Remove them and contact a pest control company to help you. They can ensure that the problem is addressed completely.
• Making repairs/changes? Use a professional company that’s licensed and insured. This ensures that quality work is being performed and that you’re covered in the event the contractor makes a mistake. Remember, any alterations to your condo will likely require approval from the association. Notify the association first before beginning any work.

And remember that those condo association fees go toward maintaining certain aspects of the building, so you don’t have to, like exterior spaces, interior common areas, security, valet parking, etc. Those are valuable services that ensure your condo is a clean, comfortable place to call home.