- Buying a condo is cheaper than buying a house, and you own one unit in a complex with several units.
- You'll pay monthly dues to the homeowner's association to cover amenities such as a pool or fitness center.
- You may be able to get a conventional, FHA, VA, or USDA mortgage to buy a condo.
Condo living can be a great fit for the right buyer. There's less maintenance, it's often more affordable, and you often get access to special amenities, like a pool, gym, or dog park.
Still, it's different from what traditional single-family homes have to offer. You don't have your own dedicated lot, you share walls (and amenities) with many neighbors, and you have to answer to a community association when making changes to — or even decorating — your property.
Here's what you should know before buying a condo.
Understanding condos
Condos are a unique type of property, so understanding them is key before you opt to buy one.
What is a condo?
A condominium, also called a condo, is a single unit in a multi-unit complex. This may be a unit in a condo building that resembles an apartment building, but sometimes it's a townhouse in a row of townhouses or half of a house.
Condos tend to be popular options in vacation areas and urban settings, where land is scarce and housing is more compact.
Condo ownership structure
When you buy a condo, you own your individual unit. Shared amenities, such as a pool or gym, are co-owned by all the owners in the complex. You'll pay dues to a homeowner's association to maintain these amenities in addition to your monthly mortgage payments.
How does buying a condo work?
Buying a condo is slightly different than buying a traditional home, so make sure you're prepared before diving in.
Steps to buying a condo
If you're eyeing a condo, the process may look a little different than other homes you may have purchased in the past.
These are the steps to buying a condominium:
- Research condo communities in your area. Work with a real estate agent to tour units at a few communities, and narrow down a shortlist of properties you might be interested in.
- Determine which community you want to buy in. Be sure to read their community rules and understand the dues the property comes with.
- Get preapproved for a mortgage. You'll want to get mortgage preapproval before you start making offers on condos so you know how much you can afford.
- Make an offer. You or your real estate agent will submit a purchase agreement to the seller that includes the details of your offer.
- Apply for your loan. Once you have an accepted offer, you'll apply for full mortgage approval. You can apply with a few mortgage lenders to see which one offers you the best deal.
- Have the condo inspected. This will help you spot any problems that might be on the property or negotiate repairs before move-in. Your lender will order a home appraisal around this time as well.
- Close on your loan. Sign your paperwork and pay your closing costs.
Finally, you'll move into the property. Be sure to stay current on your HOA dues.
Important considerations in the search process
Searching for the perfect condo can be hard. Aside from price, you should also be evaluating condominium amenities and considering the location and condition of the property.
The HOA you're buying into will also have a big impact on your life in the condo, as well as your costs, so be sure to evaluate them thoroughly, too (more on this below).
Evaluating homeowners associations (HOAs)
If you're eyeing a condo purchase, then HOA research needs to be a major part of your process. Here's what to know about these organizations and how to evaluate them.
The role and importance of HOAs
HOAs are extremely important in the condo world. Not only are they in charge of a property's maintenance and care (they're the ones who will fix that broken elevator or repair the front gate), but they manage amenities and common areas, too.
They also set rules for how you can use your property (can you Airbnb it, for example?), how parking is issued, what sort of decor is allowed, and what pets you can have, among other things. These rules can have a big impact on your life in the home.
Assessing HOA fees and regulations
When you're considering a condo community, always ask for a copy of the HOA's rules and regulations. Make sure these align with your lifestyle and goals as a homeowner before making an offer.
You should also get a detailed breakdown of the HOA's fees. These may be monthly or annual, and there may be occasional special assessments, too. Ask exactly what these costs and what they cover.
Financing your condo
While condos tend to cost less than single-family homes, many buyers will still need a mortgage loan to purchase one. Here's what you need to know about this process.
Mortgage considerations for condos
The same types of mortgages you can use for a house are available for buying a condo. See below for common condo mortgage loan requirements:
- Conventional mortgage, which is a standard mortgage that typically requires a 620 credit score and a 3% down payment
- FHA mortgage, which requires a 580 credit score and 3.5% down payment
- VA mortgages, which are for military members and veterans and require no down payment
- USDA mortgages, which are for low-to-moderate income buyers who are getting a home in a rural area
Not all condos will be approved for each kind of mortgage. Use the Department of Housing and Urban Development tool to find nearby condos that allow FHA mortgages. The VA has a similar tool for VA mortgages, and the USDA lets you search for your county to find out if the area is eligible for USDA mortgages.
Special requirements for condos
Condos are often considered riskier for lenders, because there are many occupants — and many other lenders involved. For this reason, not all condos will get approved. Lenders may consider the property's physical condition, the occupancy levels of the community, its HOA structure and budget, its insurance coverage, and other factors when evaluating an application for a condo loan.
Condo loans also often come with higher mortgage interest rates, since they're a higher risk for mortgage lenders.
Inspecting and evaluating a condo
Your lender may require a condo inspection, but if not, you might consider one anyway. These can give you a better picture of the condition of the property, and you may be able to use the inspector's findings to negotiate repairs or a lower price point.
What to look for in a condo inspection
During a condo inspection, an inspector will evaluate the entire unit from top to bottom. They'll make sure all your systems and appliances are working properly, that there are no signs of water damage or plumbing issues, and that your unit is in proper working order and hazard-free.
They'll also give you a report that details anything amiss. These could be things as small as dents in the wall or large issues like mold or HVAC problems. You can use this report to determine if you'd like to go through with the purchase or to negotiate with the seller. (They can repair the property or offer to lower the price so you can repair it yourself).
Evaluating condo amenities and community
In addition to evaluating the actual unit you'll be buying, you should evaluate the overall community, too. Walk the full property, and check out every amenity. Is there anything that looks in disrepair or poor condition? These could point to how the community is managed — and what future costs you may owe to maintain the property.
You should also take time to meet a few residents or board members. They can give you an idea of what life is like in the community.
Legal and regulatory considerations when buying a condo
There are certain legal considerations in condo purchases, which could impact your future as a homeowner. Here are the legal documents you should request when conducting your homeowners association (HOA) assessment.
Understanding bylaws and covenants
Condo HOAs will have what are called Covenants, Conditions, and Restrictions — or CCRs. These are legally binding documents filed with your state that detail how your property can be used, the HOA's responsibilities, the rules for your community, and how violations of those rules are handled.
There are also bylaws, another legal document that covers how your HOA is built and managed. It should detail how board members are chosen (and when), the number of people that must be on the board, how frequently the HOA meets, and other details. It should also break down the duties of each board seat.
Restrictions and obligations
Your HOA may have additional rules beyond what's included in the bylaws and CCRs. These are often called "rules and regulations," though it may vary by community.
These can include community rules regarding parking or use of amenities — things that may need to be changed more often than items in the CCRs or bylaws.
Closing on your condo
The last step in the condo buying process is closing. This is when you'll sign the final documents, pay your closing costs, and get the keys to your new property.
Closing process and costs
The condo closing process operates much as it does for traditional properties. Your lender will assign you a closing appointment, and you'll go to your title company or real estate attorney's office to sign the closing documents, officially putting the property into your name.
You will also use this time to pay your closing costs, which cover things like lender fees, condo insurance, appraisal fees, title fees, and more. You will also pay your down payment at this time, too. Most lenders require a cashier's check for these costs.
Moving in and joining the community
Finally, you'll be able to move into your condo and start enjoying the community amenities. Just be sure to stay up to date on your HOA dues and any special assessments. These are crucial to keeping the community and amenities in good shape (and protecting your investment).
Buying a condo FAQs
What makes a condo a condo?
Condo owners own everything within their unit, and they share ownership of common areas with the other condo owners in their community. This differs from a traditional single-family home, where you own the entire structure and the land it sits on.
Are there special requirements for financing a condo?
Yes, lenders may have stricter requirements for condo loans. They may also consider the condition of the entire property, the percentage of owner-occupied units, and the condo association's reserves and insurance coverage when deciding whether to approve a condo loan or not.
What is crucial to look for during a condo inspection?
In addition to inspecting the individual unit for defects, assess the condition of common areas and ask about recent repairs or upcoming maintenance, since these can impact future HOA fees.
How much does it cost to buy a condo?
Condos are generally less expensive compared to traditional homes in the same area, but the typical cost varies a lot depending on where you live.
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