Considering Condos?

August 19, 2022 derekevansteam

Considering Condos?

Many buyers are considering condos these days, as higher interest rates and home values have weakened purchasing power. Condos are a great choice for many homebuyers because they are generally priced lower than single family homes, offer amenities like pools, gyms, and green spaces, and are usually well maintained by the Condo Association.

What is a condo?

A condominium, condo for short, is a privately owned unit within a larger building of other units. Condos fall under a condominium association, which is responsible for maintaining, repairing, and managing the common areas. The association also has the power to adopt and enforce guidelines for the members’ use of those common areas and will typically require residents to pay monthly, quarterly, or yearly dues. With a condo, you may, or may not share one or more walls with a neighboring unit.

Condo vs. Apartment

The main difference between condos and apartments is the ownership type. Apartment buildings are often owned by a company or a real estate investment trust and are only available to rent. A condo is a single unit of a building that is owned by an individual. Owning a condo builds equity while renting an apartment doesn’t. Essentially, condos and apartments both offer amenities and are responsible for exterior property maintenance, but don’t have the same ownership options.

Condo vs. House

Condominium associations can limit the type of remodeling you can do and can enforce pet and rental restrictions. A condo may seem less private than a house because you share the building with other units. Condo prices tend to be lower than home prices.

Many buyers choose a condo because of the lifestyle it affords. If the idea of mowing the lawn and landscaping makes you cringe, a condo could be a good option because those responsibilities are handled by the condominium association. You can also enjoy a potentially cheaper purchase price, amenities and a sense of community.

Of course buyers will need to be aware that condo HOA dues are required in most communities, and that should be factored into the housing budget.

How to get a mortgage for a condo

You can use the same loan programs for condos that you’d use to buy a single-family house. Lenders will consider the property type during the underwriting process.
In addition to assessing your personal finances, mortgage lenders must also evaluate the condo association’s financial health. The lenders will determine whether the condo is warrantable by considering the following:
• Number of units purchased
• Number of units owned by investors (non-owner-occupied)
• Amenities
• Lawsuits that involve the condo association
• Number of unit owners delinquent on dues
• Upcoming special assessments

Loan Programs for Condos

Conventional loans offer financing for condominiums with only 3% down, a minimum 620 credit score and cancelable mortgage insurance, so you don’t have to put 20% down when buying a condo. However, they use guidelines set by government-sponsored entities Fannie Mae and Freddie Mac, which mean that your condo has to be warrantable./span>

FHA loans: You’ll need at least a 580 credit score to buy a condo and make the program’s minimum 3.5% down payment. Use the condominium search tool offered by the U.S. Department of Housing and Urban Development (HUD) to see if the project is approved or has been submitted for approval.

VA loans: Active-duty military members, veterans and eligible spouses can buy a condo with a VA loan. For military borrowers, this loan program has a 0% down payment, no mortgage insurance, and no loan limits, unlike FHA and conventional loans.

Of course, you don’t need to know all the details when purchasing a condo with a mortgage. Your best bet is to hire a knowledgeable real estate agent and work with a reputable lender, like the Derek Evans Team. Fill out the form below for more information to get pre approved for your condo purchase.