What to Know Before Buying a Condo

If you’ve never purchased a condo, you might be wonder by the variety of issues to consider.

Buying a condo differs from buying a home.

You’ll very certainly share walls with your neighbors, as well as other physical features not found in an independent home.

Furthermore, the whole process of making a decision and getting a mortgage may be very different.

Important Points to Remember

It’s crucial to understand the distinctions between living in a condo and living in a single-family home before deciding whether the condo lifestyle is good for you.

Single-family homes are typically less expensive than condos and require less care, making them attractive choices for first-time homeowners or those wishing to downsize.

Condo loans can be more difficult to get because some lenders have strict rules about how many people can live in the home and how much money they can borrow.

People who live in condos will have to follow the complex’s covenants, conditions, and restrictions (CC&Rs) or they could be fined, forced to conform, or sued.

People who live in condos pay a fee each month to cover the costs of maintaining and fixing things like the lawns, pools, lobby, elevators, and entertainment rooms in the complex.

Who Should Purchase a Condo?

“Are you the condo type?” is one of the first questions you should ask yourself.

So, what does that imply?

For one thing, being a city dweller.

Many condos are found in urban areas.

Condos are cropping up in metropolitan downtowns, and some are even featuring grocery stores, bank offices, and other businesses as part of the development.

There may be increased noise and congestion as a result of this convenience.

If you’re considering buying a condo in a specific region, go there at different times of the day and night to evaluate how noisy or brightly illuminated it is.

If noise or light bother you, this may not be the best option.

Homeowners Association

The Homeowners Association is one of the benefits of condo ownership (HOA).

It contains a declaration of covenants, conditions, and restrictions (CC&Rs) that spells out the rules that you, as a condo owner, must follow in order to reside there.

Condo living may not be for you if you find yourself unable to follow the CC&Rs.

You could be punished, forced to conform, or even sued if you don’t follow the rules.

Condos may be a good fit for some people, such as first-time homebuyers who can’t afford a more expensive single-family home.

Low Maintenance

Condos also have the benefit of being low-maintenance.

This can be a desirable characteristic for older people who want a home that is easier to maintain physically.

Condos might also be a good option for someone who wishes to be in the heart of a big city.

Guide to Buying a Condominium

It’s possible that buying a condo is more difficult than buying a house.

When it comes to loans for this type of home, lenders are quite cautious.

They often want a certain percentage of the units to be occupied by humans, or “owner-occupied,” as they call it.

Another restriction might be the maximum number of condos that a single investor can own.

Lenders typically do not allow a single person to hold more than 10% of a building’s units.

Frequently, lenders will impose restrictions on the building’s occupancy rate.

Before giving any funding, several lenders ask that at least 90% of the units be sold.

For people buying condos, lenders may impose stricter loan-to-value (LTV) ratios and limitations.

The LTV ratio is the difference between the condo’s value and the amount owed on it.

For example, if you put down 20% on a home, your LTV will be 80%.

Section 234(c) loans for condos are available for up to 30 years and are insured by the Federal Housing Administration (FHA).

While the terms for borrowers are comparable to those for home loans, there are other limits on condos: for starters, the building must have more than four units.

There may be additional charges associated with condo ownership.

Even if your HOA provides insurance, you may need to purchase supplemental homeowners’ insurance.

In order to make sure that the HOA’s insurance doesn’t shift risk to you in order to keep the premiums low, read all of the documents very carefully.

Also keep in mind that you’ll have to pay a monthly condo rent.

A condominium complex’s common facilities are maintained and repaired by fees paid by all of the complex’s owners.

The fees often fund the upkeep of the complex’s lobbies, elevators, pools, leisure facilities, parking lots, and landscaping.

Some funds may be set aside to cover major repairs like roof replacements or exterior painting.

When it comes to condo prices, the size of the complex and what it has to offer can have a big impact on how much they cost.

Condos with issues should be avoided.

Researching the HOA and attending a HOA meeting are two of the most critical things you can do to protect yourself when buying a condo.

You should also inquire about the condo’s management with the neighbors to determine if they are satisfied.

Examine the bylaws to see what the HOA is responsible for.

You can also request minutes from recent board and member meetings, as well as information on how much the HOA dues have climbed in recent years.

Another thing to look into is the board’s legal background, both in terms of taxes and other matters.

If you buy, you might discover that there are pending cases that you don’t want to be a part of.

Unpaid HOA dues have led some condo associations into bankruptcy.

lenders may stop giving money to people who don’t pay their rent on time, which could hurt the value of their apartments when they’re sold.

Check for delinquencies and reserve funds in your financial records.

A good organization should set aside at least 25% of gross income for maintenance and emergencies.

If they run out of money, you may be subjected to a charge.

Check out the most recent property tax assessments as well.

If the sale price of your condo is modest but the tax assessment is high, you may be in for a bigger tax bill than you expected.

Check to see if the taxes are in line with the property’s genuine value.

Final Thoughts

When times are tough, condominiums can be a decent investment for the appropriate buyer in the right location, albeit they are more difficult to acquire and sell than detached houses.

Before purchasing a condo, do your research and investigate the HOA, CC&Rs, and any tax and insurance issues.

There are more problems with condo sales than there are with single-family homes, so make sure you hire a real estate agent and a loan officer who have a lot of experience in this type of deal.