The reason condo listings are particularly challenging during the mortgage approval process is that it requires looking at the financial status of the entire building, not just a single unit. In Fargo, there have been increasing instances in recent years where condo sales contracts get stuck at the loan approval stage, primarily due to issues with HOA financial statements and reserve fund documents. In the past, it was common to sign the contract and pass the appraisal without much trouble all the way to closing, but now, the ability to secure a loan often varies depending on which HOA manages the property.

HOA fees cover a wide range of expenses, including building exterior maintenance, master insurance, common area management, landscaping and snow removal, trash collection, and contributions to the reserve fund. Nationwide, the average monthly condo HOA fee ranges from $200 to $400, while high-end condos with more amenities can exceed $500 to $1,000. In North Dakota, the median HOA fee is about $157 per month, which is lower than the national average, reflecting the fact that the local condo market, including Fargo, is more composed of small to mid-rise buildings rather than large resort-style complexes.

However, a low HOA fee does not guarantee peace of mind. In fact, buildings with insufficient reserve funds are at greater risk of imposing sudden special assessments on all residents when major repairs are needed, such as for roofs, plumbing, or elevators. North Dakota does not have specific state laws mandating reserve fund contributions or reserve studies. Unlike Florida, which enforced reserve fund requirements after the Surfside collapse in 2021, North Dakota relies on the voluntary financial management of HOA boards.

This is where the scrutiny of mortgage lenders becomes crucial. Lenders following Fannie Mae or Freddie Mac guidelines assess factors such as the HOA's delinquency rate, reserve fund ratio, ongoing litigation, and the proportion of commercial space. If these criteria are not met, the entire building may be classified as a non-warrantable condo, making loan conditions stricter or even leading to denial. Whether for personal residence or investment purposes, it is essential to first verify the overall financial health of the building rather than making decisions based solely on one listing.

• Recent 2-3 years of HOA budgets and financial statements
• Reserve fund balance and whether a reserve study has been conducted
• Delinquency rates and ongoing litigation
• Key provisions of management regulations, such as rental restrictions and pet policies
• Details of recent or upcoming special assessments

In Fargo, Korean families often focus on school districts primarily in West Fargo and the southern part of downtown Fargo, where the level of HOA fees and reserve funds varies by location. School district ratings can be referenced through metrics like GreatSchools or Niche, but since school boundaries frequently change, it is advisable to verify which school a prospective address is assigned to before finalizing a contract. Investors looking to purchase condos for rental income should also calculate the impact of HOA fees on rental yield. Even if the fees appear low, a building with inadequate reserve funds may incur special assessments during the holding period, significantly affecting yield calculations. The market does not guarantee appreciation or specific returns, so a risk-aware approach is necessary. For those newly arrived from Korea and exploring their first settlement, considering renting to familiarize themselves with the area before transitioning to a purchase may be worthwhile.

Many people also find themselves weighing the options between condos in downtown Fargo and townhomes in the suburbs with the same budget. Condos include exterior maintenance and insurance in their fees, resulting in higher fixed monthly expenses, but they reduce the amount of personal upkeep required. In contrast, townhomes often have lower fees but may require homeowners to handle external maintenance themselves. Families relocating from other states should also consider that property tax and insurance calculation methods may differ from their previous residences. This article does not constitute investment or legal advice, and it is recommended to consult with real estate professionals and accountants before finalizing any contracts.