Condo fee conversion for mortgage qualification

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A number of people look at buying townhouse condos instead of half side duplexes or smaller houses because there is an element of "sticker shock".   The half side or smaller house often have a higher price than the townhouse condo.  Price is important.

For rule of thumb for qualifying, when using a five year fixed rate, 35 year amortization mortgage on a house bought with five percent down- I have used 4.64% as a test rate.

For each $100 of monthly condo fee, it equates to the qualifying power of about $10,000 of net mortgage proceeds.  Net mortgage proceeds have the 3.15% default insurance premium already factored in.

So, if the condo fees were $250 per month, for qualification purposes that's the equivelant of $25,000 worth of no condo fee home buying.

The reverse is also true.  If you obtained a pre-qualification but did not anticipate buying a townhouse condo, your approval will be $25,000 less mortgage if the condo fees are $250.