Condominiums, or condos, can be great alternatives to detached homes. City dwellers, singles, couples, seniors, and many others may find condos that suit their needs and budgets. Others may simply prefer low-maintenance living. Buyers who feel “priced out” of homes may discover condos offer an affordable homeownership alternative. For some buyers, a condo is a place to live for a few years. For others, a condo can be a home sweet home for a lifetime.
Although getting a mortgage loan to purchase a condo is similar to buying a detached home, there are some important differences. This article will help you learn the terms, questions, and obligations you should consider before you decide to buy a condo.
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You may have a basic understanding of what a condo is: you own your “unit” within a larger building or community of other condo owners. You jointly own the exterior property and common areas with all unit owners in the building or community. Condo owners pay a monthly “condo fee” that covers general repairs and maintenance to the building’s exteriors and common areas and builds up a cash reserve for future needs.
There are many styles of condos, from high-rise apartments reached through common interior hallways or garden-style apartments with outside entrances to multi-story townhomes. Each condo is different, but generally, the maintenance of exterior and common areas is taken care of through your condo fee, so you don’t have to worry about replacing a roof, for example.
But there’s more to know. And one important thing is that condo ownership is homeownership. As a condo owner, you’ll enjoy both the benefits and the responsibilities of homeownership.
You may find that homeownership provides you with tax and investment advantages. For example, you may be able to deduct your mortgage interest if you itemize deductions on your tax return, and you may discover that, like detached homes, condos may appreciate in value over time. Please consult your tax advisor about your individual situation.
Your lender will look at many of the same kinds of borrower qualifications for loans secured by condos as for loans secured by detached homes. Your lender must know that you can repay the loan without undue hardship to you or risk of default on your mortgage.
But with condos, there are a few more things to know. To ensure your condo qualifies for the most favorable loan financing, Your lender may evaluate several factors designed to assess the financial and governance strength of the condo community or building you are considering.
You’ll want to evaluate the condo carefully before finalizing your purchase offer. You’ll want to know:
Remember, you’re not just buying a home; you’re buying into a community. Take the time to look around, learn, and ask the right questions.
To help you learn more about purchasing a condo, here are some questions you may want to ask or research.
Remember, this is only a partial list to help you get started. If you have questions, ask your lender, real estate professional, real estate attorney, or the officers of the condo’s HOA. You may also find it helpful to do some online research.
In most cases, you have a limited period to review the condo documents after the seller accepts your purchase contract. Talk to your real estate professional, know your rights—and, if necessary, consult a real estate attorney.
Be proactive. Prepare a checklist about the home style, services, and amenities that are important to you, and make sure you’ve covered the standard home-buying basics. When you’re ready to purchase a condo, your lender can help you with the process and help you select the mortgage financing option that is best for you.
If you have credit or other issues that need to be addressed before you can buy, ask your lender to refer you to a HUD-approved housing counselor.
At Mortgage 1, we have the expertise and experience to help make your homebuying process a breeze. Find a local loan officer near you, or contact us today to learn more about our available home loans for condos.