The Basics of Buying a Condominium
Single-family homes and condominiums offer vastly different lifestyles, so it’s helpful if you know what’s in store for you when you buy a home with shared walls and amenities.
You own the airspace in your unit while everything else - the roof, exterior, grounds, lobby, elevators, parking garages, swimming pool, dog park, and other amenities are owned collectively and shared by all the condominium owners in your building. You’ll have access to more luxuries than you’d otherwise have, but remember everything is shared. To keep things nice, there will be rules to follow, which are in place to protect residents’ quality of life as well as their investment.
For that reason, your property will be managed by a homeowner’s association (HOA) where you have a vote for things you want or want to see changed. Your monthly HOA dues will pay for all the maintenance of the building and property while you’re free to come and go without having to do yardwork or fix-its. The more amenities your building offers, the higher the monthly dues will be, proportionate to your building’s condition and the reserves that are needed to pay for improvements or replacements in the future.
Condos are more plentiful in urban centers, where populations are dense. If you prefer being around people, you’ll love the access that urban living offers. You’ll be close to work centers and public transportation, and live in a walkable area that offers coffee shops and restaurants, shopping, services and much more. But density has its downside – the streets are busy and you may hear your neighbors playing music because you’re closer together than you would be in a single-family home.
Lenders have certain requirements for condos that don’t apply to single-family homes. For example, Federal Housing Administration (FHA) approved lenders insist that 80% of the condo owners are owner-occupants. You’ll have to obtain the financial records of the HOA to determine if too many owners are delinquent in their dues, how many units are rented out, and whether the HOA has enough in reserves to replace the roof or retile the swimming pool in ten years.
However, due to the recent revision of the US Department of Housing and Urban Development condominium loan policies, you’ll have greater access to mortgage loans that are federally guaranteed through the (FHA).
The new guidelines will extend project certifications from two years to three, allow for single-unit mortgage approvals, allow a higher owner-occupant VS renter occupancy ratio, and increase the number of units eligible to be purchased with FHA loans in a single building. That’s a significant improvement as condos are often more suitable for many singles, couples and small families who wish to take advantage of easier qualification, low-down payment FHA loans – particularly first-time buyers. The result should also make condos easier to resell since the pool of available buyers and loans are larger.