Building your own asset comes with no more landlord hassles, no compromise, no uncertainty, tax benefits and most importantly, emotional security. Buying a house reaps these benefits and many more. This makes buying your own house; a milestone and lifelong dream for almost all people worldwide.
Like everything in the market, when you go out to buy; there are several alternatives available. There is a variety including single-family homes, townhomes, multi-family homes and of course, condominiums.
Over the years; Condos or condominiums have gained prominence and are a preferred choice of living by the majority. Around 74 million Americans which equates to about 27% of Americans live in condos as of now. Many people are buying condos as an investment or as a place to stay due to several benefits that come with it.
A few benefits for instance are lower price, HOA handling maintenance of outdoor common areas, community amenities, convenience, safety, investment opportunities, freedom to customize the interior of your condo and so on. But is a condo a good first home for you?
If you are here; you are likely considering buying a condo too. However; even though condos are affordable as compared to other home alternatives; they are still a huge investment. Before you buy your first condo, there are some things you should know.
So, let’s dive in and get a glimpse into a few things that matter when buying a condo for the first time.
What is a Condo?
First things first; what exactly is a condo? Condos are apartments or units within a multi-unit property. The individual units or apartments are privately owned whereas surrounding common areas like recreational parks, and amenities like gyms, and clubs are jointly owned. A monthly fee is collected from all the condo owners to maintain the common areas. A key difference between a house and a condo is that condos are more affordable and are likely to be smaller in area.
A Guide for First-time Condo Buyers
If you are first time buying a condo, here is a step-by-step guide to help you out:
Now that we are acquainted with what a condo is, we can proceed to understand how to buy a condo for the first time. First-time buying can be intimidating and perplexing without the right guidance. It can also end up being laborious and you might just not find the right condo for you. However; if you follow a few steps, your experience of first time buying a condo will be seamless. Here is a step-by-step guide to aid this!
1] Get pre-approved
If you are planning to avail of a mortgage when buying a condo for the first time, it is a good idea to get pre-approval. This will allow you to set a budget and limit your choices, thereby simplifying your future proceedings including search. Additionally; sellers view pre-approval of mortgage as a brownie point; which will help you stand tall in the buyers competing for the same condo.
2] Begin your hunt
Start searching for the condo that best fits your needs and choices. It can be challenging to find the right one if you go at it alone; therefore, it is recommended that you have a quality realtor as your ally, who knows the ins and outs of the locality and market and can find you the best condo, fitting your budget and requirements.
3] Get a home inspection done
Lastly, get a home inspection done thoroughly. An official inspector will investigate the plumbing, wiring, and structure of the unit, and provide you with a detailed report of the condition of the house. Using this data, you can negotiate with the seller and also avoid future expenses.
4] Make an offer
Making an offer is a critical step that follows selecting a condo for you. Negotiating is a must. Do your research about the average prices in the locality, discuss with your realtor and make an offer. It is likely that the seller will deny the offer, then make counteroffers and bargain till a deal that benefits both parties is achieved.
5] Apply for a Condo loan
Simply having a pre-approved loan is not enough when it comes to condos. The Condo project should also be approved. If the project is on the FHA list (Federal Housing Association); the process will be easy; however, if not, you will have to go for a conventional mortgage for which you need high credit scores.
6] Meet the HOA [Condo Board]
Connect with the HOA which looks after the maintenance and upkeep of shared areas. Get familiar with the rules and regulations laid down by the HOA; so, you know the expenses that will be incurred monthly. Submit an application with financial statements and get approved by the HOA.
Post this; once both parties agree on the terms, a contract will be created under legal framework; sign this and seal the deal!
10 Tips on Buying a Condo in 2023
Additional to the above steps, if you are equipped with certain tips on buying a condo, the process will be smooth and effortless.
Below are mentioned 10 tips on buying a condo that can serve as your checklist as you proceed.
1] Determine if it is the right fit for you. If you are someone who values privacy and dreams of gardening in your backyard; condos are not for you.
2] Hire an experienced, knowledgeable, trustworthy and proficient realtor so your entire condo-buying venture goes smoothly.
3] Obtain financing. If you have been thinking of what to consider when buying a condo; financing is a crucial aspect.
Getting loans for condos is no easy task. If you are looking for an FHA loan, ensure the community is approved. The basic criteria for approval by FHA are that a minimum of 80% of units are occupied by owners. You can also go for a private mortgage in case FDA doesn’t work out. However; you will have to pay a higher cost.
4] Get a detailed account of what the condo includes. For instance, parking, modular kitchen etc
5] Know the association fees. In condo communities; residents are expected to pay monthly or annual fees to maintain common areas. Do not be allured by the amenities before you know the association fees.
6] Know what all the association fees cover. The central tenet of association fees is insurance and maintenance, however, additional to this, even lawn maintenance, maintenance of amenities like pool, indoor games, water sewer services, road maintenance, and picking trash are also covered. It’s therefore essential to know what is covered and what is excluded.
7] Review association rules. To keep harmony and peace, every association has a set of rules and regulations that they follow. Know these before you make your choice.
8] Research about the maintenance management company. It's essential to research which company leads the maintenance because if one which is non-responsive with a bad reputation is in charge, eventually the maintenance might degrade and bring down the price of your condo and make living frustrating.
9] Ask about special assessments. If a significant project is undertaken in a condo community, a large fee is charged from the condo owners. This is termed a special assessment. It could be in the form of a structural repair, adding a roof and so on. Knowing special assessments is important to avoid financial surprises in the future and gain full disclosure before buying the property.
10] Predict your future plans beforehand. Predicting the future might not be accurate but it’s a good idea to estimate how much your condo will pay back in the future so you know what to expect.
FAQs
Is buying a condo a good investment?
Condos are available at low prices. If you find a condo which is affordable and in a developing locality; it might end up being a very lucrative investment.
How much condo insurance do I need?
Condo insurance is meant to cover you financially in case of property loss, damage or theft of belongings. Usually, HOA offers insurance that includes bare walls coverage that protects the exterior of the condo; single entity coverage that covers fixtures outside the condo; and all-in coverage that covers the interior of condo units. Figure out what is covered by HOA and fill the gaps with your condo insurance.
How much of a down payment do I need for a condo?
The down payment for a condo depends on the area in square footage and the locality of the condo. Usually, it varies between 3%- 20% of the unit’s price.
What is the average property tax on a condo?
An average American pays $2,471 in property taxes each year. The tax rates are determined based on the size of the house and the locality. The average property tax for a condo is roughly 12.267%
Conclusion
By now you must have understood what you need to consider when buying a condo. With everything mentioned above and the guidance of a proficient realtor, you will certainly find the best fit for you.
So; if being surrounded by neighbors and availing of amenities without having to maintain them is your thing; it’s time to invest in a condo! And, for that, you definitely need a realtor so what’s better than partnering with Jessica Bush, who knows it all and is just a call away.
