Wondering How to Buy a Condominium?
Condominiums are a good idea for single people or married couples without children who are tired of keeping up a yard and a full house, so knowing how to buy a condominium is something you should research, if you’re in one of those two groups. Condos tend to be smaller than most family-size homes, but they are less expensive and don’t require yard work and other repairs.
Also, condominium resorts tend to have common pool areas and top-of-the-line gyms, so buying a condo also gives recently married couples and seniors another good housing option. Learn what the positives and negatives of owning a condominium is, then decide whether it’s the right home choice for you.
What Is a Condominium?
A condominium is an apartment that you own. Strictly speaking, there is no real physical difference in a condo and an apartment, except that the condominium residents owns their apartments. When you hear that an apartment complex is being converted into a condominium complex, that means it’s being turned into a homeowner, instead of a rental, property.
There might be improvements made to the condo complex, when this happens, but the legal distinction is whether you have a lease or a mortgage. Condominiums can be all different prices.
How to Buy a Condominium – Consider Long-Term Housing Arrangements
Consider how long you want to live in the condo. If you expect to stay in the location for at least 2 years, it pays to buy your own condominium. You’ll have to pay closing costs to buy a condo, so if you live there less than two years before moving, buying a condominium property is not cost-effective.
Many seniors retire to a condominium, so owning a condo in your retirement lets you have housing indefinitely. Buying condos are no different than buying any other property, since the property value should stay high and you’ll accrue equity, the longer you live there.
Buying a Condominium – Price the Market
Make a list of everything you want in a condominium, from floor space to amenities like fitness areas, swimming pools, hot tubs and sauna rooms. The more you want, the more the monthly association fees are going to be.
Start to look at townhouse communities and condominium housing in the area you want to live in. Get an idea of what’s available, while pricing the condo properties. Meet with the local homeowners association, to get to know the people you’ll be dealing with.
When you look at a condominium, study factors like “common walls”, to see how much noise you’ll have to put up with from neighbors.
Talk to a Real Estate Broker about Buying a Condominum
Talk to a real estate agent about obtaining a market analysis of the condo prices in the area you’re going to live in. This gives you a firm understanding of which condo associations are asking too much, and which condos are the right price. Remember to study the annual appreciation in the value of condos. Remember that studying how to buy a condominium is, in part, also a study of how to acquire a condo property you’ll eventually want to sell for value.
Learn About the Building
When you visit the condo, ask questions and get an idea about the building’s management’s reputation. Appropriate questions to ask include how well the HA or building management responds to repair questions and maintenance questions. Remember to ask about how often repairs are needed, which tells you the general quality of the condominium. Ask about soundproofing and insulation (energy bills), and any other specific concerns you have about your next home.
Here’s a list of other questions to consider when researching how to buy a condominium.
- Ask about the Homeowners Association’s Reserve Funds. This is used for repairs & maintenance.
- Ask whether the HOA bills residents for assessments, when repairs are made.
- Check online the Homeowners Association’s history of assessments for the past 10 years. The fewer, the better.
- Inquire about how restrictive the HOA is on questions like holiday lighting and other seemingly minor concerns.
- Acquire a copy of the “covenants, conditions and restrictions”, often referred to as the “CC&R”.
- If the condominium is still under construction, ask for a Certificate of Operation (COO), to make sure enough homeowners are signed up, so the lenders don’t pull out. 30-35% is a safe number.
- Ask whether the condo association dues increase often, from year to year. In any case, factor CA’s fees into your monthly mortgage costs.How to Buy
Pre-Qualify for a Mortgage
Start searching around for pre-qualification for a condo mortgage. You want this business out of the way, when it comes time to buy a condominium.
If you’re a first-time homeowner, study your mortgage types. Fixed rate mortgages have a set payment every month, for the duration of the mortgage. An adjustable rate mortgage begins with a low interest rate, and might vary from time to time, according to the structure of the mortgage and other factors. These tend to increase.
The balloon-payment is a third option, but if you want to stay in your condominium for more than 5 years, you don’t want one of these. A balloon payment starts out with reasonable mortgage payments, but at a point, you must pay one large “balloon payment”. This price is so prohibitive, that it tends to force the mortgage holder to get out of the property.
When searching for pre-qualification for a mortgage, remember to get your credit report and clear up any mistakes on it first. Start shopping for a mortgage at your personal bank or savings & loan. Contact a mortgage broker, but also shop online for mortgage deals – or at least price mortgages on the Internet, so you know you’re getting an equitable deal.
Make an Offer – Closing on a Condo
Once you have factored everything above into the equation and you feel good about buying the townhouse, make an offer on the condo. This is where getting pre-qualified for a mortgage helps, so you can close on the condominium deal as soon as you make your decision. Handle your end of the business and let any delays come from someone else.
Buying a Condominium
Learning how to buy a condominium is every bit as complicated as buying a house, but condominiums are cheaper than a big house and come with less maintenance. Buying a condo is a good option for a first-time homeowner or a retired couple, so see whether purchasing a condominium is a good idea for you.