When budgeting for a condo, do not forget to factor in the fees

Whether you are looking at a condominium as an affordable first home or as a perfect place to downsize, do not forget to check the condo fees. As you start to search for condos in the Washington area or around the country, you will soon realize the amount you will pay to a condo association varies wildly from one development to another.When you are financing your condo purchase, your lender will include that condo fee in your debt-to-income ratio, which compares your gross monthly income with the minimum payment on all recurring debt. The condo fee — along with your principal, interest, property taxes and homeowner’s insurance — will be part of your housing payment. Some condo buildings are approved for FHA (Federal Housing Administration) financing, and others are not. This is something home buyers, particularly first-time ones, must consider when condo shopping.

Even if you are paying cash for your condo, you will need to keep in mind that unlike other debts, your condo fee will never be paid down to zero. Not only will you always be obligated to pay it while you own the condo, the fee could also increase over time to keep up with inflation, to pay for ongoing community maintenance and to bolster the condo association reserve fund.

What condo fees cover

Among the reasons condo fees vary from one community to another are the size and age of the development as well as the amenities and features covered by the fee.

Large developments that pay a management company can have higher fees than a small self-managed building. However, splitting costs between just four or six units can mean condo fees are a bit higher than a building with 10 or 15 units.

Older condos often have higher fees than newer buildings because they need to factor in repair and replacement of common-area heating and air conditioning systems, an elevator or a surface parking lot.

When examining condo fees, it is important to realize you are not making a dollar-for-dollar comparison. While condo association fees typically cover a reserve fund for major repairs, a master insurance policy for the community, maintenance of the development and trash and snow removal, various other things may or may not be covered.

For example, some condo fees include utilities such as water, cable service, gas and electricity. Others cover some or none of those utilities. You need to know which services are covered and which you will pay for, as well as an estimate of those utility bills.