Buying A Condominium

Learn What To Consider When Buying A Condominium

Thinking about buying a condominium?

The benefits of condominium ownership include lower prices than for single family homes and less maintenance. But there is much more involved in buying a condominium than in buying a single family home.

Condominium refers to a type of common ownership that is different from fee simple ownership found with single family homes. In many condominium complexes, the owners share ownership of the land and structures and literally own a right to the space where there unit is located. Realtors refer to this type of ownership as owning "from the paint in."

Different condominium forms can result in different types of ownership. For example, in many condominiums, owners are responsible for their physical structures. This arrangement is common in the case of site condominiums, which are essentially detached single family homes owned in a condominium format. The term "condominium" does not describe a particular style of building but instead the type of ownership.

Under condominium ownership, an association made up of owners of the complex manages a budget to handle maintenance and upkeep of the complex. Owners pay a monthly maintenance fee and this fee is included when qualifying for your monthly housing payment for a mortgage. On the positive side, condominium owners then do not have the hassle of managing lawns, leaves, or snow.

Getting a mortgage for a condominium is definitely more difficult than getting a mortgage for a single family home. This is because the association must be analyzed just like you the borrower. If either you or the association does not have adequate finances, your loan will be rejected.

How does a home buyer analyze a condominium?

The good news is that home buyers can rely in part upon the due diligence and rigorous analysis of a mortgage underwriter to help determine if a condominium complex is financially sound. Underwriters are required to analyze all of the issues which could present potential problems down the line, including owner occupancy ratios, capital reserves and the adequacy of the annual operating budget. If they find a problem then your loan will be denied and you will be saved from getting stuck with a condominium financial disaster.

The general requirement for lenders is that a condominium complex has to be at least 60% owner occupied. Anything less than that and lenders will most likely be unable to finance your condominium.

On top of the mortgage lender analysis, home buyers should do their own reading too. Nearly every state requires that home buyers receive a copy of detailed documents about the condominium and the condominium association before being permitted to purchase the condominium. Your lender will also analyze many of these documents as well, but be aware that they are only analyzing financial factors, not living conditions. For example, if major work is anticipated on the condominium as soon as you move in, you might spend a year living in a construction site. Read all documentation carefully when buying a condominium so you know what you are getting.

For a free mortgage pre-approval and an exact rate quote to help you purchase your next condominium purchase mortgage, complete a free rate quote request now!.

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If you have any questions that you would like to get answered by our expert mortgage brokers, please email us or call us at 1-877-868-2503.

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