Essential Information For Understanding Condominiums
Buying a condo can be an easier path to homeownership. It offers you more freedom to design your living space than a rental ever could, but without the costs of a single-family home. You'll also have less upkeep to worry about while still owning an asset that should increase in value.
But what do you need to know about buying a condominium before you begin your search? We review what to know about condos.
What is a Condo, and How is it Different from Other Homes?
Lots of real estate agents are asked what exactly is a condo. A condo is an abbreviated description of a condominium. A condominium is a unit within a larger development. The unit could be part of a large building similar to an apartment block or many detached units spread out in the complex.
The big difference between a single-family home and a condo is what you own. With a single-family home, you'll own the walls inside and out as well as the land the home is situated on.
You do not own the exterior with a condo, just the walls and what's inside them. When buying a condominium, you also aren't going to own the land the home sits on.
Owning a condominium normally means you will share the use of common spaces within the complex. This could mean a lobby area, elevators, and more exciting amenities like a gym or swimming pool. Though with these potential advantages, it does mean you often can't make any changes to outdoor areas of the complex.
There Will Be a Homeowners Association
A homeowners association manages communal areas in the development. Typically, the board of the HOA will be made up of owners from within the development.
While the members of the HOA normally have the same ownership rights as anyone else who owns one of the condominiums, they do create and uphold the rules. The rules might restrict the way you use your home, including rules about things like pet ownership and noise.
You will have to pay monthly towards the HOA to cover maintenance of the building and communal areas. This will be on top of your mortgage and other costs, so it's important to consider this expense in your overall calculations.
How Buying a Condo Differs from Other Home Purchases?
While many things are the same in the condo-buying process as any other type of home, there are a couple of differences. Getting a mortgage can be slightly more involved than when you purchase a house.
You may discover that your lender requires more information about the condo development before approving your mortgage. They might want to check how much insurance the complex has and how many units are owner-occupied.
They'll also be interested in how well run the HOA is, checking their finances and if they have been involved in any litigation.
The lender will want to make sure that the HOA is financially well-managed. This is something you should want to know, too, since you don't want to suddenly find yourself with a large bill to cover some emergency maintenance.
To better find out how well the HOA operates, the minutes of previous meetings can be read. Your real estate agent should be able to get hold of these, giving you an insight into how well managed the complex really is.
How to Decide If a Condominium is Right for You
Your lifestyle requirements should be a large part of your decision over whether a condo is right for you or not. Condos tend to have less privacy than a house but often give you more amenities. Condos are similar to apartments in that respect.
Will you make much use of the amenities on offer, and are you happy paying the ongoing costs to upkeep them? And are you fine with knowing more about your neighbors and them knowing more about you?
Choosing a Condo
It is often more important to find a condo complex that you like rather than an individual unit. The community, and the HOA, are important factors in your experience of living in the home and even if you will get a mortgage in the first place.
In particular, some government-backed programs have strict rules about condo developments. If you are using Fannie or Freddy, VA loans, or FHA loans, you could find your choices more limited. Though if you are using FHA loans, you'll find that their standards are lower than they used to be, giving you a larger choice of condos.
Before making the leap from owning a single-family home into purchasing a condo, you should do plenty of due diligence.
Owning a condo is not going to be for everyone. In fact, there are numerous reasons why you could become disappointed in your decision to buy a condo. Have a look at some of the common reasons you may not want to own one.
Final Thoughts
For some folks, owning a condo is awesome. For others, it is a lifestyle with too many rules and restrictions. Before buying a condo, make sure you think through your decision before ending up with buyer's remorse.
Whenever buying a condo you really need to think through whether you can accept being told what to do by others. The condominium rules should be studied carefully.
Make sure you also go over the financials with a fine-tooth comb to make sure you're not purchasing into a neighborhood with financial issues.
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