Is Buying A Condo Different To Buying A House?
You've been searching for a while and have finally found the place you want to spend at least the next few years. You're ready to put down an offer and you have a lot of knowledge about the process of buying a home. But there’s a difference: you're buying a condo.
Buying a condo can be a great way of putting down roots without splurging on a freestanding house. You may have chosen a condo because you live in a crowded city and want a getaway, want to save money on the mortgage, you want to use it as a vacation rental, you like the amenities available, or for many other reasons.
There are clear differences between buying a house and buying a condo. The most evident is that you are only paying for what is inside your walls. However, some of the differences are not so well-known.
Here are the ways in which buying a condo is different to buying a house:
Buying a condo can be as big a financial investment as buying a freestanding house, especially if you are looking at something near the beach. For this reason, many people buying a condo for the first time assume that they will have to apply for a regular mortgage. However, this is not usually the case.
Condo mortgages are considered riskier than mortgages on freestanding homes. As such, they have more stringent requirements. This can be difficult for some condo buyers, which is why there are condo loans available from the FHA (Federal Housing Association). These have relaxed credit requirements and require a smaller down payment.
Take note that you will only be able to apply for an FHA loan if your building is on the FHA list. If not, you will need to apply for a conventional mortgage.
Many homeowners are surprised by how much they have to pay at the end of every month. Even if they bought their home in cash, there are property taxes and utility bills that add up. However, these monthly fees are not quite as significant as those paid by condo owners.
When you own a condo, you own part of the building. Based on the amenities available in your building and your HOA’s requirements, you will have to pay a certain amount in fees every month. These fees go towards all the amenities like laundry rooms, gyms, pools, etc. as well as the running of the HOA.
They also include a share in other building expenses, like insurance. While you have your own condo insurance which is cheaper than what you would pay on a house, the building requires insurance that is administered by the HOA. Building maintenance is also included in the calculation of the fee.
Ultimately, your HOA fees can push your monthly payments up quite significantly. You're still going to pay less than you would for a house, but the differences no longer look as drastic.
Meet Your Neighbors
When you own a home, whether a condo or freestanding house, you are going to have to deal with neighbors. Neighbors can become nightmares if they take issue with something they don’t like about how you live. As the owner of a house, you can largely ignore your neighbors unless they have the legal right to take action against you.
In a condo, however, you can't just ignore your neighbors. Bad neighbors can be a needle in the side consistently for years. Whether they take issue with the volume of your TV, the fact that you have guests over, or anything else, they are right there to bother you day after day.
This is why meeting the neighbors is a good idea before settling on a condo. If you find that you get along with them, ask them if they experience any issues from the HOA or from other condo owners. They may be able to give you information on some red flags you would not have known about otherwise.