A buyer preparing to sign a condo contract in Closter once faced a setback during the mortgage approval stage. There were no issues with personal credit scores or income. The problem was with the condo complex itself. It was classified as having insufficient reserve funds, making the loan conditions stricter.

The reason lenders do not approve condo loans based solely on personal credit scores is clear. Condo loans are tied to the financial health of the entire building, not just a single unit. If one unit falls behind on maintenance fees, the remaining units must share the burden, so banks must consider the payment ability of the entire complex.

Closter is primarily a single-family home neighborhood. There are not many condos or townhomes available. In such cases, it is more realistic to refer to the overall statistics for Bergen County rather than city-level data. The median maintenance fee for condos in Bergen County is reported to be around $490 per month. The overall average for New Jersey is $423 per month, while typical condos range from $200 to $400 per month, but high-rise buildings or those with many amenities can exceed $1,000.

Maintenance fees cover building exterior maintenance, master insurance, common area management, landscaping, and trash collection, as well as reserve fund contributions. New Jersey tends to have higher maintenance fees compared to other states due to the significant burden of insurance premiums and property taxes.

One of the key factors lenders assess is the financial health of the HOA. They evaluate delinquency rates, reserve fund ratios, ongoing lawsuits, and the proportion of commercial space. If the complex does not meet the criteria, it may be classified as a non-warrantable condo, leading to loan denial or stricter conditions. Therefore, checking the reserve status in advance is a practical way to increase the chances of loan approval.

Families moving to Closter from other states should consider not only maintenance fees but also property taxes. New Jersey is among the states with the highest property taxes in the nation, so even if a complex has low maintenance fees, the total housing costs can be higher than expected when property taxes are added. Tax rates can vary by town, so individual verification is necessary.

If you are looking for a school district preferred by the Korean community, be sure to check the school ratings in Closter as well. While resources like GreatSchools or Niche can be helpful, school district boundaries change frequently, so it is safer to verify the assigned school based on the address of the property you are interested in.

New Jersey shows a different trend in this area compared to other states. The Reserve Study Law enacted in 2023 will take effect in January 2024, and additional legislation will be implemented in August 2025. Condos and co-ops must have a reserve study prepared by a qualified engineer or certified professional, and they must manage their reserve balances to ensure they do not fall into the negative over a 30-year funding plan. The study must be renewed every five years, and complexes without a study in the last five years must complete their initial study by January 2025.

This law serves as a protective measure for buyers. Be sure to request confirmation of whether the complex is complying with the law and what the recent reserve study results were. It is also advisable to check the regulations regarding rental restrictions and renovation approval processes. Don't just compare the sale price and maintenance fees; reviewing the maintenance fee increase rates over the past three years can help gauge future financial burdens. If you are preparing to purchase your first condo after moving from Korea, the self-governing structure where the HOA board directly decides the budget and regulations may feel unfamiliar. Requesting recent board meeting minutes or the annual budget can help you assess the financial status and operational methods of the complex.

Here are the items to verify before signing a contract:

• Recent maintenance fee increase rates and history of special assessments
• Reserve fund balance and whether a reserve study has been conducted
• Delinquency rates and any ongoing lawsuits
• Rental restrictions and regulations regarding pets and renovations

This article is not investment or legal advice, and it is recommended to consult with a professional before finalizing any contracts.