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If you’re still unsure whether a condo or regular single-family home would work best for you, here are a few questions to ask yourself before putting in an offer on one or the other. Remember – the process of buying a condo isn't too different from buying a house. So, whichever you choose, you'll want to make sure you're demonstrating your best offer to the seller.
Condos are usually managed by a condominium association, which is responsible for maintaining, repairing, replacing and managing common areas like hallways, garages and recreation facilities. The association also has the power to adopt and enforce guidelines for the members’ use of those common areas and typically requires residents to pay monthly or yearly dues. A condominium, or a “condo” for short, is a typically more affordable and lower-maintenance alternative to a single-family home. Located within communities of other units, condos are privately owned, but owners share common areas. A key selling point of a condo is that the owner generally only has to take care of the interior of their unit, while a property management company handles the rest. A single-family home, on the other hand, is a form of housing where the homeowner owns both the inside of their house and the land it rests on.
Buying A Condo Vs. A House: A Guide On How To Decide
Other home buying costs may also prove higher for condo loan applicants, including private mortgage insurance and home appraisals, given larger down payment costs and more potential hidden hazards. Many mortgage brokers will not lend to a buyer of a non-warrantable condo since Fannie Mae and Freddie Mac won’t buy those mortgages. Unfortunately, this limits the borrowing options for potential homeowners seeking a condo mortgage loan. The remaining lenders look at non-warrantable condo loans as an increased risk, and will typically only offer financing at high interest rates with large down payment requirements. Lenders have been wary of condo loans since the whole mortgage breakdown. There is added risk for the mortgage lender with a condo because the homeowner’s association introduces an added level of variability and potential risk beyond your personal finances.
Use a mortgage calculator to make sure your mortgage payment, including HOA fees, is within your budget before you make an offer. Mortgageloan.com is a product of ICB Solutions, a division of Neighbors Bank. ICB Solutions partners with a private company, Mortgage Research Center, LLC, (nmls # 1907), that provides mortgage information and connects homebuyers with lenders. Neither Mortgageloan.com, Mortgage Research Center nor ICB Solutions are endorsed by, sponsored by or affiliated with any government agency.
Condo Loans: Defined And Explained
In addition, there are certain costs you have to pay in connection with a condo mortgage that you don't encounter with a standard home loan. The property manager or HOA representative completes the form and send it back to the lender. If the condominium meets requirements, the buyer can purchase the unit with a conventional loan. He also explains condo loans can get tricky if you don’t fit in the right box of what a lender wants to see.
From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia. Additionally, HOA dues are considered part of your monthly mortgage payment, which affects your debt-to-income ratio. With dues driving up your mortgage cost, it can be hard to qualify for a large enough mortgage to buy the condo you want. Two types of condo developments consist of individual units that are freestanding structures.
Cons Of Living In A Condo Vs. House
Condos are individual units in a residential building that share walls as well as amenities like outdoor space, pools, gyms and more. Condos are often more affordable and require less maintenance than traditional single-family homes, which makes condos a popular option among buyers. Condo residents also own their individual units instead of renting out an apartment, which is a plus if you’re looking to buy instead of rent. To know if buying a condo is worth it, you should evaluate all of the costs. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site.
One attractive quality of a condo is that there’s less maintenance and responsibility for the owner. For the most part, you’re only responsible for maintaining the condo’s interior, and the property manager should take care of the exterior. Community spaces and shared amenities are also strong perks — these may include movie theater rooms, game rooms, tennis courts, pools, and a grill or picnic area. You also share ownership and responsibility for the condominium’s community spaces. This includes the walls and floors of your condo, as well as spaces like stairways, lobbies, exteriors and more.
Disadvantages of a Condominium
When you own a condo, what you own often depends on the type of property where the condo is located. Andrew Dehan is a professional writer who writes about real estate and homeownership. It might be helpful to hire a real estate agent who specializes in condo purchases. They can help guide you through HOA regulations and any documentation specific to living in a particular condo building. Financing a condo, though, can involve a different process than other home purchases.
Because condos are individually owned units in a wider community building, lenders look at them a little differently than single-family homes. More occupants in a condominium complex mean more people are at risk of default. Plus, situations outside of the borrower's control – like a broken elevator or leaky roof – could require special assessments and cost the borrower more money as a result. While the mortgage process for a condo is similar to taking out a traditional mortgage, condo loans may have different or additional regulations established by the mortgage lender. Condo loans may also come with slightly higher interest rates. They can be riskier for mortgage lenders because of external factors like HOA rules and restrictions that are outside of the borrower’s control.
If you learn that a condo is non-warrantable, consider the risks before you decide to buy. Some condos require prospective buyers to get approval from a condo board before they can complete the purchase. In that case, meeting the condo board would be an additional step in the process. The loan terms shown above do not include amounts for taxes or insurance premiums.
But the word condominium refers to the legal ownership of the residence, not the architecture. NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions.
This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. One downside to owning a home is that the overall costs are typically higher.
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