With home prices on the rise across the country, more homebuyers are looking at condominiums as an affordable and convenient way to own a home. The process of buying a condo is like buying a house in many ways, but you should prepare for some key differences. Here are some things to consider.
The costs of owning a condo vs. a house
According to the National Association of REALTORS®, the median condo cost $307,100 in July compared to the median single-family home at $367,000. In spite of the price difference, it’s important to remember that condos carry some unique costs, including:
- Condo fees: You’ll pay a monthly fee to the condo (or homeowners) association for costs such as amenities and general maintenance for the property. A single-family home might also require homeowners association fees, but they are usually smaller and paid annually.
- Special assessments: Your condo association may ask you to contribute to the cost of one-off repairs and other nonrecurring expenses, such as if the property’s roof needs to be replaced due to damage from a storm.
To prepare for buying a condo, be sure to request information about recurring fees upfront. And if you notice signs that a building may need major repairs, you may want to explore other properties.
Understanding your condo’s value
Compared to single-family homes, condos tend to grow in value less quickly. But buying a condo can still be a great investment if you consider factors such as location and amenities before making a purchase, according to Ramsey Solutions. For example, a condo located in a trendy neighborhood near shops and restaurants may have potential to appreciate.
When searching for a condo, you can also follow another simple rule of thumb—if a city has a hot housing market, it could be a great place to invest in a condo. To see which U.S. cities are experiencing the biggest booms in housing prices in 2021, check out CoreLogic’s U.S. Home Price Insights.
Working with your lender
According to LendingTree, your mortgage lender will ask you a series of questions about the condo property before they decide to lend. They’ll want to know the ratio of purchased to unpurchased units, the number of units owned by investors, the building’s amenities, and more.
Luckily, some mortgage lenders specialize in condos. By choosing a specialized lender, you can leverage their experience to avoid delays during the closing process.
Determine how much you need for a down payment
For many years, homebuyers were expected to make a standard down payment of at least 20%, regardless of whether they were purchasing a condo, a single-family home, or another type of property. But lenders have started offering more flexible mortgage options in recent years. Depending on your creditworthiness at the time you apply, you may be eligible to make a smaller down payment.
Your lender can help you understand your loan options and answer any questions you have about down payments. To start planning today, read more about 4 low down payment mortgage options.
The bottom line for condo buyers
Buying a condo can be a convenient and affordable option for homeowners who want to share a sense of community with their neighbors, enjoy amenities without having to leave the building, and more. With a little planning and research, anyone hoping to own a condo can find great options throughout the U.S.
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