Purchasing a Condominium: What You Need to Know

There is an opportunity now for people interested in buying a condominium unit. In the past 30 years, condominium prices were usually growing at a faster rate than single-family housing. In 2020, however, the prices of single-family homes rose by an average of 12.3 percent, while the prices of condominium units rose by only 6.4 percent.

In June 2021, the median price for a single-family home was $370,600, an increase of 24.4 percent from the same period in the previous year. The median price for a condominium unit was $311,600, an increase of 19.1 percent from June 2020. Both prices are for existing units.

Real estate analysts attribute the lag in condominium prices compared to single-family homes to the pandemic. People want more space with a yard for their own private outdoor area as a reaction to the restrictions in going out. With the rollout of vaccinations, however, fully vaccinated people now have more freedom to move around. This may eventually make condominium units attractive again. Hence, people who are interested in buying now must take advantage of current prices before new demand makes them go up.

Rent Will Continue to Rise

People who are considering buying a condominium unit are likely renting at the moment and feeling the pressure of increasing rent costs. From January to June 2021, rents increased by 9.2 percent. In contrast, the usual increase in the first half of a year was two to three percent.

Analysts state that there are not enough apartments to absorb demand. Because home prices are soaring, the usual percentage of people who will shift from renting to becoming homeowners cannot afford to do so. In the meantime, young people are reaching the age when they need to rent their own living space. This situation will further push up rents.

Those currently renting must study their options to find out if they can afford to buy a condominium unit. Instead of shelling out rent every month for a space they will never own, it makes more financial sense to pay a mortgage toward owning the space they live in.

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Mortgage and HOA Fees for a Condominium Unit

Not all condominiums qualify for a mortgage under the FHA, VA, and even Fannie Mae or Freddie Mac. Buyers must research the approved condominiums in the area they want to buy in and choose among those that are covered. The type of loan the buyer gets will also determine the percentage of down payment required.

In addition to the monthly mortgage payment, condominium unit owners must pay a monthly homeowners association (HOA) fee. This covers maintenance costs and insurance for common areas, as well as security. Prospective buyers must find out the monthly fees for each building they are considering.

Apart from the HOA monthly fees, prospective buyers must do diligent research on the requirements and limitations imposed by the association for each condominium they are considering. For instance, whether modifications are allowed in the unit and to what extent. If there is a balcony, many condominiums do not want any changes that will affect the façade of the building.

Insurance Is Essential

Owners need to get insurance for the condominium unit, referred to as an HO6 policy. This covers the unit from the walls, ceiling, and floors to everything inside. The owner will receive payment for damages due to theft, fire, and hurricanes, among others. If the damages require the owner to stay elsewhere temporarily, insurance can help pay for that, as well. It is important for owners to read through the coverage, including the fine print.

The Benefits of Condo Living

Buying a condominium unit is not necessarily a compromise against buying a single-family home. For some people, living in a condo is preferable. The living space is just right for singles or couples with no children. There is less to clean and maintain.

There are also many amenities in condo living that are not in single-family homes. There is usually a pool that residents can enjoy without having to invest in one. Most have a gym and a spa that residents can use for free. Some condominiums have commercial spaces on the ground floor with a restaurant, coffee shop, bar, and convenience store. Condominium units are also usually located in areas within walking distance of other shops.

Condominium living also inspires a more mindful lifestyle. Because of the smaller space, there is no room for clutter and excess. Belongings are carefully curated, and only the best remain. This keeps the mind unencumbered and freer. One can have better mental health when their surroundings are good for their wellness.

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