Besides sharing walls and potentially cutting down on maintenance costs, the process of purchasing a condominium (or condo) differs significantly from financing a standard single-family home. In fact, the vast diversity in logistics, mortgage options and additional costs may just surprise you. If you’re hoping to find a condo in the near future, you’ll certainly want to study up on these four factors before signing on the dotted line.
Condos aren’t for everyone
Some buyers will be more comfortable in a freestanding home while others are better suited for condo living. Before making a purchase, you’ll want to determine where your needs and preferences lie.
One major consideration is your neighborhood of choice. Most apartments are located in urban or suburban markets, particularly the larger and more comprehensive ones. So, if you’re after rural charm, unfortunately, an apartment complex may not be right for you.
You’ll also need to consider the kind of community you’d like to join. Apartment dwellers share walls, common areas and amenities while traditional homeowners tend to enjoy more privacy. When it comes to your living situation, there is no one right answer. Each and every homebuyer will feel differently.
Finally, you’ll want to consider your preferences when it comes to home maintenance. Condos often require less maintenance, from shoveling driveways to clearing gutters (Money Under 30, 2020). Accordingly, they may be tempting for older buyers or those who have no interest in getting their hands dirty.
The mortgage process will differ
Financing a condo also looks a bit different (Money Under 30, 2019). Lenders tend to employ stricter standards, including the number of units, the number of investors after ownership and the occupancy rate. You can opt for a conventional, FHA or VA loan, but be prepared to jump through additional hoops, including FHA approval, Department of Veteran Affairs approval, or outsized down payment amounts. The requirements will depend on your loan type, property of choice and personal financial situation, so be sure you understand the specifics.
While you may face stricter standards in obtaining a condo, keep in mind that lending discrimination is illegal. If you suspect you are a victim of lending discrimination, start by reporting the issue to your mortgage professional. If needed, you can also hire an attorney, take legal action or report the incident to the Federal Housing Administration (FHA).
There may be additional costs
In 2018, the average home price was $241,700 while the average condo cost $231,600 (Money Under 30, 2020). In most cases, a smaller down payment will yield a smaller monthly payment and greater potential savings. On the other hand, while a condo may come with a lower price tag, there are often some additional costs you’ll want to be aware of. For example, you may still need to join a homeowners association (HOA), purchase homeowners insurance, pay monthly fees, or even manage parking or pet fees. Before making your purchase, get a clear idea of the total cost, all fees included.
All condos aren’t created equal
Of course, not unlike traditional home shopping, you’ll want to find the right condo, not just any condo. Get a clear picture of the tenets, HOA, neighborhood and building. You may also want to inquire about the noise level, gauge the amount of natural light in the unit throughout the day, and thoroughly inspect all amenities and common areas. If you have a car, safe and secure parking may also be important. After all, you’re unlikely to have access to a traditional driveway and garage.
There are many benefits to condo living, but before committing you’ll want to get a clear picture of the process. From financing to fees, these spaces differ quite a bit from your traditional single-family home. With some self-reflection and investigation, you can achieve the dream of homeownership, wherever you decide to reside.
Published on July 26, 2021
