Buying a condo is not that different from buying a traditional home, but there are a few key distinctions.
Buying a condo (that is, a condominium) is much like buying other kinds of real estate. Both adequate cash-flow income and good credit are crucial to obtain a loan to buy a condo.
Because condos are generally located in building structures with multiple housing units and almost never have private space on the first floor, some of the expectations and considerations are not at all the same as when you purchase a conventional single-family style detached home.
Financing a condo purchase
In order to buy a condominium, you need the appropriate financing, most often from a mortgage lender approved by the Federal Housing Administration (FHA). MortgageLoan.com points out that a few mortgage lenders such as Freddie Mac and Fannie Mae, require thorough reviews of the detailed condo board documents and operations relative to the occupancy rate and condition of the building.
If the mortgage lender should find the condo’s occupancy or operations to be inadequate, your loan application could be denied. A standard mortgage, generally repaid over so many years, lets a condo buyer purchase a home, and pay down the original loan and interest via payment installations as predetermined in a formal written agreement.
Approval of the condo board
Some condo buildings call for board approval prior to letting a potential buyer purchase one of their units. Applicable local, state, and federal regulations against illegal discrimination may become an issue in these board approval processes.
Some questions the board may ask refer to personal lifestyle, professional background, pets, etc. Also, condo boards quite often conduct in-depth interviews and ask that you provide them with several character references.
Unlike a standard insurance policy for a conventional home, condo owners typically buy insurance that’s directly related to their unit, not for the whole condo building that accommodates their unit or the additional space connected to the property.
Insurance for general areas in a condominium building is paid through dues or common fees from the collective condo owners. Some insurance policies cover only certain elements of the condo, such as the walls and wiring of a unit, while others cover walls and fixtures.
You should understand and recognize tfeatures are actually covered by the policy before you sign on the dotted line with regard to insurance policies, condo renovations, and purchases.
Other considerations to think about
Sometimes, condo units which are offered far below market value are allotted to eligible owners through a lottery-style system. The Department of Housing, Preservation and Development in New York City screens real estate companies that support the required lotteries for city-subsidized community housing units. By contrast, in San Francisco the Department of Public Works manages the yearly lottery for residential condo conversion type units.
Common misconceptions about condos
Sometimes, people confuse condos with co-ops, but they are not the same. One huge difference between a condominium and a co-op is that the condo owner possesses a title to a property. A co-op resident, however, actually owns a share of the company that owns the building.