Buying a condo for the first time can be a smart path to homeownership in 2021. Condos offer homeownership at a lower purchase price than single-family homes and a lot less maintenance. Buying a condo also offers community living, access to shared amenities such as fitness centers, pools, tennis courts, or parks. As a result, condos are an attractive option for first-time homebuyers and investors alike.
How to Buy a Condo in 2021: 5 Steps to the Right Mortgage
Whether you’re looking to buy a condo as a primary residence or investment property, these five steps will help guide you toward the right mortgage.
Step 1: Decide if buying a condo fits your lifestyle (and your wallet).
Buying a condo might be a smart investment but is it also the right fit for your lifestyle? Consider the benefits of buying a condo to decide. Do you like living in a close community with your neighbors? Would you enjoy shared access to amenities like a fitness center or a dog park? Do you prefer a low-maintenance property while someone else maintains the grounds?
On the flip side, if you like to garden or would love a backyard for entertaining, the condo life might not be the best fit. Ask about HOA rules to find out if there are any restrictions. Can you have pets? Are there rules about grilling on your balcony?
Buying a condo means sharing walls, living in close proximity, and it can feel similar to apartment living. Find out about rules and restrictions along with amenities to decide if it’s a good fit.
Step 2: Work with an experienced real estate agent.
Buying a condo isn’t the same as buying a single-family residence. You’re better of working with a real estate that specializes in condominiums. They’ll have a strong pulse on the area and will be able to guide you through the right questions when you’re ready to make an offer.
An experienced real estate agent will know which condo developments have the best resale values and which ones offer the amenities that interest you. They’ll also know if there have been issues with an HOA or condo board, along with maintenance issues or infrastructure problems.
Step 3: Confirm HOA fees and special assessments.
Homeownership association (HOA) dues are standard when you buy a condo. The fees are paid monthly or quarterly and cover ongoing maintenance for the grounds. However, HOA fees are not all created equal. Compare amenities and costs with other condominiums in the area to make sure the fees are reasonable and that the property is well-managed. Also, confirm what the HOA fees cover and what they do not cover when buying a condo.
Special assessments are slightly different from HOA fees but equally important since they can add a high cost to your monthly expenses. Special assessments are additional funds that are paid directly to the management company or condo board. The funds cover the cost of unexpected expenses above and beyond regular maintenance.
If the HOA fees or special assessments are unusually high, this could be a red flag. Similarly, take time to survey the grounds and the amenities. Take notice to see that everything is well-maintained and in good condition.
Step 4: Ask if there are rules about renting the condo.
Asking about rental policies is important when buying a condo. If you plan to use the property as an investment, you want to make sure you’ll be able to rent the property on your timeline. Are there rental cars? Are there limits to how many rental units are allowed? Are there rules about short-term vs. long-term rentals or the number of guests?
On the other hand, if you are buying a condo as a primary residence, you’ll still want to know the rules about rentals. For example, do you want to deal with short-term guests near your condo? Will a high percentage of rental units lower the resale value of your condo?
Step 5: Get the right financing (and a condo that is FHA approved).
First, talk to an experienced mortgage broker to get preapproved. Getting preapproved will give you confidence when you’re ready to make an offer!
Second, note that financing a condo is different from getting a mortgage for a single-family detached home. Mortgage lenders have several regulations when it comes to buying a condo. As a result, it can sometimes be more difficult to get approved. Be prepared to offer a larger down payment, provide more financial documentation, or even get more information about the condo if required by the lender.
Third, plan to make a 20% down payment if possible. If that doesn’t fit your financial goals, ask about an FHA loan. FHA loans typically require that 80% of the condominium units are owner-occupied. FHA loans also require a more thorough inspection when you’re buying a condo. The home inspection will usually include both the condo for sale and the entire property complex as well.
Talk to an experienced mortgage broker about your homeownership goals. Buying a condo is a smart path to becoming a homeowner in 2021, and getting preapproved for a mortgage is the best step you can take.
How to Apply
We partner with mortgage lenders across several states, and we can help you buy a condo at a low-interest rate. A mortgage that fits your budget and your lifestyle is within reach, and it only takes a few minutes to get started [apply here].
If you’re ready to buy a condo and start building equity, we can help you get approved with a custom mortgage. We partner with mortgage lenders in California, Oregon, Washington, and Colorado. Mortgage rates are still low, and we can help you get the financing you need. Give us a call to get started.