A Beginner's Guide to Purchasing a Condo

Buying a condo is an exciting opportunity. It can be freeing to have a place of your own, and it can open doors to purchasing a single-family home in the future or becoming an investment property.

However, there are some downsides and costs you may have to weigh as well, including Homeowner Association (HOA) fees and rules, condo insurance and a lack of privacy. By doing your due diligence on purchasing a condo, you can decide if it’s the right housing option for you.

Prior to purchasing a condo, you should understand what this type of home offers, including the pros and cons, to determine if condo ownership is for you. Below you’ll find out more about condos versus other types of housing, the associated costs, benefits and drawbacks and who is best suited for condo living.

Condo is short for condominium, and it’s a residential complex where each unit is owned by a different owner. While condo owners can change the interiors of their homes as they desire and are responsible for the maintenance and repairs of their homes and exterior units — like a garage or storage space — the homeowner’s association will take care of everything else in the building and on the property. It’s different from a house or townhouse, where you would be responsible for everything, but you may not have to pay HOA fees depending on the community you’re in.

You can get a mortgage for a condo, house or townhouse. Living in a condo is like living in an apartment, except you don’t have a landlord who is responsible for maintenance and repairs. Depending on where you live and your financial situation, you could end up doling out less money for your monthly mortgage payment versus your monthly rent for your apartment. Here are some more differences and similarities between condos, apartments, houses and townhouses.

Purchasing the space you’ll call home is a big step and determining what type of home would be best for you is a crucial place to start. So, is a condo right for you? Decide if this type of property is ideal for your needs by learning all about the benefits and drawbacks condo ownership brings.

For instance, you may not be aware of expensive HOA fees and restrictions that an association could impose on you. Alternatively, you may be grateful for the HOA, which will take care of the maintenance outside of your property, saving you money every year. You may enjoy community living and being in close contact with neighbors, or you might be worried about living right next to other people. Below are some key pros and cons of condo life to consider.

A condo is typically best for people who are single, couples or small families. It is not well-suited for a big family, unless it’s a temporary situation and the family is planning to use the money earned from the sale of their condo to purchase a townhouse or single-family home. Since many condos are located in large cities, it’s a good idea to purchase one if you like living in urban areas. If you enjoy apartment life, you’ll likely love condo life as well.

Before you begin shopping for a condo, you need to keep a few tips in mind. For example, it’s crucial to find the right realtor with experience in the community in which you’re looking to make your purchase. You should also figure out what amenities your condo will include and all the costs and fees associated with your purchase. Then, you can ensure you’re making the right choice.

When you’re looking into how to buy a condo, you’ll discover you need to get condo insurance, or HO-6 insurance, too. It’s going to cover what your condo association’s policy will not cover, such as damage to your belongings if there’s a fire or another disaster and if you get sued because someone got injured in your home. Typically, a mortgage lender will require that you purchase condo insurance covering hazardous and natural disasters as long as you have a loan with them. The average cost of condo insurance is $625 per year if you have $60,000 worth of personal liability coverage and a $1,000 deductible.

When shopping for condo insurance, make sure you keep these tips in mind to ensure you’re getting a good deal and you’re covering everything you need.

When you purchase a condo, you’re going to need to get a mortgage if you’re not outright purchasing it with cash. You can get a mortgage for a condo whether it’s your primary residence, a vacation home or an investment property. Typically, you’ll need a larger down payment if it’s not going to be your primary residence. A condo mortgage is different from a regular mortgage, because the lender may evaluate the building’s occupancy, the age of the building, the amenities provided, and the building’s current finances.

There are different types of mortgages you can get for a condo, including conventional, FHA, USDA and VA loans. Here are the options you have when looking for financing.

Conventional loans are traditional fixed-rate or adjustable-rate mortgages that come with monthly payments as well as a loan time period, such as 15 or 30 years. You may be able to procure a conventional loan from a bank. Your eligibility will depend on factors like your credit score and your down payment size.

Federal Housing Administration (FHA) loans are federally-backed loans that have easier credit and lower down payment requirements. The rules are going to be stricter for FHA loans for condos than they will for single-family homes.

Check to see that your building meets the requirements for getting an FHA loan before applying. If you are rejected for an FHA loan, you could work on improving your credit score, saving a higher down payment, and/or applying for a conventional loan instead.

Veterans Administration (VA) loans are for veterans, current members of the military and eligible surviving spouses. Keep in mind that the approval process for a VA loan for a condo can take several months. But once your purchase is approved, you get a lifetime approval.

You can search the Veterans Information Portal to find VA-approved complexes. Then, you will have a better chance of getting approved for your loan.

A U.S. Department of Agriculture (USDA) loan is for people who are looking to purchase a condo in a certain rural area. These are for low-income Americans who have poor credit. The mortgages they can get may require no down payment and might offer low interest. The condo must be your primary residence, and there are income limits. Mortgage insurance will be included.

When applying for a USDA loan, you’ll need to show that you have steady employment and income. You could qualify if you are self-employed.

Before applying for a loan, do your research to see if you’d qualify for one. Look into the requirements for conventional, USDA, FHA and VA loans from the lenders you wish to borrow from. Additionally, you’ll need to get your finances in order, seek out pre-approval, and make sure the condo community you’re purchasing from is financially sound.

While purchasing a condo could be a great idea for your finances and your family, there are some common mistakes you’ll want to avoid — like not doing your research on the condo association. Avoid these mistakes and you’ll have a much more positive purchasing experience.

Condos can be attractive investment opportunities, or they can end up being a complete waste of money. By looking into investing in condos and doing your thorough research, you can determine if you’re likely to make money off your investment. You’ll want to see how the condo has appreciated over the years and if it’s likely to continue going up in the future.

A condo might be a good investment if it’s in an area where real estate is going up. By investing at the right time, you can earn back the money you invest, and then some, to invest in another property or use it to purchase a primary residence. Below are a few key investment points to keep in mind.

There are, of course, downsides to investing in condos. Before making a purchase, you should research these downsides, including the fact that you can’t get any property when you purchase a condo.

You may be wondering: are condos a good investment? By learning about investing in condos, you can make sure that your investment is going to be likely to pay off. Here are some tips you can use to decide if investing in a condo is the right decision for you.

With these resources, you can figure out if you would like to make the leap and purchase a condo. Look into each one to help you make your decision.

• Mortgage Calculator: Use the mortgage calculator to determine what your monthly mortgage payment will be depending on the value of the home, your down payment and your interest rate for your loan.
• Finder: Compare different mortgage rates for condos to see which lender you’d eventually like to go with for your purchase.
• U.S. Department of Veterans Affairs: Do your research on VA home loans and apply for a VA home loan Certificate of Eligibility (COE), which is the first step to getting a VA-backed condo loan.
• USDAloans.com: Apply for USDA loans from the government and see if you’re able to get approved for this type of loan to buy a condo.
• HUD.gov: Use this tool to find a list of FHA-approved condominium projects by name, location, or status.