Are you in the market for a new home? Whether you are a first-time homebuyer or just looking to downsize from a traditional house, condominiums are an excellent investment.
You can enjoy many perks by owning a condo. Many complexes offer amenities like pools and recreational centers that are not accessible to your average single-family homeowner. Also, residents don’t need to worry about many typical homeownership expenses due to the shared space.
If you are interested in saving money and moving into a comfortable new community, condominiums are the way to go! However, don’t go into the home buying experience blind. Read on to see what you should know before buying your new condo.
Condominiums vs. Traditional Housing
A condominium (condo) differs from a traditional single-family home or apartment. A condo is a residence within a shared building or community. You can find them in both urban and suburban neighborhoods.
The key difference between a condo and an apartment is the ownership of the residence. Renters sign a lease with a landlord for a unit in an apartment complex. Condo owners pay a mortgage on the property and assume ownership of that unit.
Condo units and residential complexes vary in size. Some condominiums can have dozens of households within the same complex, while others may have only two or three.
These properties are becoming increasingly popular among small families and the retired community, mainly due to the lack of effort required for residents to maintain the property. Unlike a traditional single-family home, a condo association is usually responsible for general upkeep.
Is a Condo Right for You?
Weigh your options when deciding if a condo is right for you. Condo ownership has many benefits but also challenges. We have created a list of considerations to help you understand the features and responsibilities that come with this type of property. Here are some things to keep in mind while shopping for your new home.
Maintenance Costs
One of the most appealing elements of condo living is the relatively low maintenance costs. The weight of paying for everyday upkeep does not put unnecessary pressure on owners. Some of the responsibilities that a condo association covers include:
- Landscaping
- Facility sanitation
- Exterior and interior building repairs
- Electrical and plumbing concerns
Many duties of a homeowners association are similar to that of typical landlord responsibilities. With these responsibilities covered, the condo owner saves time and money.
Knowing Your Neighbors
It is no secret that condominiums are close-knit communities. You will likely find yourself rubbing elbows with people of different backgrounds and occupations. Your neighbors might have a parking space next to yours or maybe spend time out in the shared park area of the complex.
For some, forming meaningful relationships in their new community is important. A condo community is a great way to foster those friendships. Some properties offer events and holiday celebrations to help residents socialize and get to know each other.
Partnering with a real estate agent familiar with the community will help manage your expectations about where you live. If you prefer privacy, many condo property options are available to satisfy those needs. Some buildings offer more seclusion from your neighbors than others.
Affordable Homeownership
Home shopping can be a difficult market to navigate on a tight budget. So many new homeowners choose condominiums because they are typically smaller than traditional houses and generally cost less. According to the National Association of Realtors, the national average price of a condo was around $45,000 less than a single-family home in 2021. So many new homeowners choose condominiums because they are typically smaller than traditional houses and generally cost less.
Condo owners also feel relieved that they can spend less money on insurance than the average homeowner. Owning a larger traditional property usually requires more expensive insurance to cover all the home’s assets. In contrast, most condos typically require you only to insure your individual unit. A homeowners association policy for the complex covers the rest.
Saving more on buying a condo as a home allows you to put thousands of dollars into other lifestyle investments. Living in a comfortable unit is a great way to raise a family and put the money you save toward education, vehicle expenses, or other financial commitments.
Amenities You Won’t Get Elsewhere
Many condo communities offer recreational facilities and other amenities convenient to your living area. Traditional homeowners often spend tens of thousands of dollars installing and insuring pools, gym equipment, etc. Some or all of these options may be available to condo owners with no extra costs aside from association membership fees.
HOAs usually put effort into providing quality resources and facilities to their condo residents to help build equity on the property. This also creates an attractive image of the community for homebuyers. Standard features you may see include:
- Reserved parking
- Pools and spa areas
- Shared social spaces or parks
- Fitness centers
- Athletic courts
- Daycare and play areas for kids
With condo amenities, you can find something valuable for every type of person. Discussing your preferences and needs with a real estate agent can help you determine the best condo for you so that you are only paying for a place with the features you desire.
Condo Homeowners Association
The homeowners association is a valuable resource for your condo living experience. It eats the costs of most repairs and maintenance on the property and is a great way to connect with and determine the needs of the community.
Remember that while living in a condo, you still pay a fee to the homeowners association to fund perks. A condo owner should consider those fees while budgeting for a mortgage and any other expenses the association doesn’t cover.
Not all homeowners associations are the same. Most associations apply regulations to their communities to enhance their lifestyle. While certain regulations may be good for some households, they may not suit you.
If you enjoy loud music late at night, try to find a condo that does not enforce unreasonable noise ordinances. Other regulations could include limiting grilling on the property, hanging decorations, and allowing pets on the grounds.
Understanding the HOA rules and regulations before buying a unit is essential for a healthy living experience on the property.
Additional Read: Do I Need Homeowners Insurance And Who Should I Use?
Keep the Long Term in Mind
Condos may be a great place to start your homeownership journey, but they are not always simple to sell once you are ready to move on.
HOA restrictions and underfunding can create hurdles for building equity. Many condo owners are surprised to find that the value of their home has dropped dramatically since purchase. Financial problems in the HOA or deterioration of its property can impact your selling flexibility.
A unit is difficult to sell if the HOA has not prepared it for the long term. Get to know the history of the condo and its community just as you would a traditional home to plan better for the future.
Questions to Ask a Real Estate Agent
Now that you have educated yourself on condo living, it’s time to ask the right questions! Here are the top five questions you should ask your real estate agent about any condo you like:
Who Is the Contact for the HOA?
This question comes in handy when you want to learn more about the property and meet the person who handles communication and emergencies.
Is There Any Ongoing Litigation?
Knowing if there is ongoing litigation will give you an idea of what a lender is willing to invest in the property. A good rule of thumb is to ask if more than 10% of the annual budget goes into reserves. Current mortgage rules require the association to have at least 10% to cover unexpected repairs and regular maintenance.
Are Any Units Late on Assessments?
This question will help you gauge if the association could be struggling financially. Meeting assessments on time can determine whether or not the association can afford repairs.
How Often Should I Expect Special Assessments?
A special assessment usually happens when an HOA needs new funding to fulfill the reserve. It might be a red flag if there are upcoming or frequent special assessments.
Does Any One Resident Own More Than 10% of the Units?
Mortgage brokers may not award loans as easily if a single resident owns more than 10% of units on the property.
It’s Time to Speak With a Loan Expert
You now have the knowledge you need to get started moving forward with your condo-hunting journey. Make your experience even easier by speaking with one of our loan officers from A and N Mortgage Services. Our team has worked hard to achieve an A+ rating for ten consecutive years, ensuring that our clients receive the quality help they deserve.
For more information about what to know before buying a condo, reach out to us online or call us at A and N Mortgage Services in Chicago, IL, at (773) 305-5626.
A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.
