What to know about buying a condo

Condominiums, or condos, are an affordable alternative for potential homeowners looking to live in popular urban or suburban areas. 

Buyers find a lot of positives to buying a condo. Condos could offer luxury amenities and less maintenance than owning a home might. But there are also some downsides like HOA rules and fees. Also, if you are looking to get a mortgage for a condo you will have to make sure the unit you buy meets guidelines set by Fannie Mae, Freddie Mac or the FHA. 

Start your mortgage application for a condo today! 

Condos are individually owned units inside a larger complex. Condos offer owners private spaces with access to common spaces and amenities in the property.  

The public spaces and amenities are a major draw for potential buyers. These can include gyms, pools, pet-friendly areas and extra security on site. Condo owners will have to pay monthly fees for upkeep and have access to the property and amenities offered.  

One drawback to condos can be the lack of privacy some owners feel. Some condo complexes may also allow renters in units. Most mortgage lenders look for condominium complexes to have at least 50% owner-occupants before issuing a loan for your condo. 

Buying a condo can be a good idea if you are looking to enter the housing market in a popular area at an often more affordable price. 

Condos are usually cheaper than single-family homes in the same area. While single-family homes tend to appreciate in value quicker than condos, they will rise in value alongside the area’s housing market. 

Like buying any kind of home, there are questions potential owners tend to ask before buying a condo. These are some of the most common questions potential condo owners have. 

Homeowners association (HOA) fees for a condo can vary based on location, property values, amenities provided and frequency of payments. Owners can expect to pay between $50 and $1,000 monthly, though typical monthly payments range from $100 to $300. 

If your HOA fees are paid quarterly or annually instead of monthly, your payments will be higher. With quarterly or annual payments, it is smart to make sure you save monthly to avoid larger payments. 

Non-warrantable is a term that defines any condos that don’t meet Fannie Mae or Freddie Mac requirements for a loan. 

Some the things that could make a condo non-warrantable and that you should watch out for are: 

• If the project is still under construction and not yet complete.  

• 15% or more of the units are over 60 days behind on HOA fees.  

• Units operate or part of the property also works as a hotel or motel.  

• More than 50% of the units are being rented or leased.  

• 20% or more of the total units cannot be owned by the same person or organization.  

• If the project is involved in a lawsuit.  

• The HOA is not setting aside at least 10% of dues for maintenance and emergencies.  

• HOA insurance that does not comply agency standards 

• Pending or proposed special assessments  

• Ongoing repair projects that are critical in nature 

Besides HOA fees, there are a few additional costs that come with buying a condo.  

If the building or property requires major repairs and upgrades that will cost more than what they currently have, owners will be charged a special assessment fee. Some condos may ask for move-in fees or administrative charges.  

You will also have to keep up the maintenance on your own condo, which can add to your overall condo cost. 

Your condo’s HOA fees typically grant you access to the benefits your complex offers.  

Your HOA fees allow you to use amenities and common areas, as the dues are used for maintenance and upkeep of the areas. Your fees are also put toward waste management, pest control and management service costs. 

In some condominium complexes, your HOA fees will include your condo’s utilities and insurance for the entire complex, though it’s not the same as home insurance. 

Being a part of a larger complex, many condo owners want to know rights they have in the property. As a condo owner, here are a few things that you have the right to: 

• To rent or lease your unit. 

• Access HOA documents and financial reports. 

• Ask questions about HOA decisions and special assessments. 

• Use shared facilities, amenities and spaces. 

• Tap into your condo’s equity. 

Getting a mortgage for a condo is the same process as getting a mortgage for any other kind of home. The only difference is that you will have to make sure it is a warrantable condo. 

When you have made sure that the condo you have chosen is a warrantable condo, you can start your mortgage application online. For your application, lenders will check your credit score, debt-to-income ratio, savings and income.  

To get a mortgage for a condo, start your loan application today!