7 Important Factors You Should Consider Before Deciding On Buying A Condo Or A House
What Is The Difference between buying a condo or a house?
The difference between buying a condo or a house. Seven important factors you need to understand before buying a condo or a house. NSH Mortgage has the wisdom and tools to help you on which option suits you.
Here are some common question house buyers ask themselves. What is a condominium? Which is riskier a condo or a house? What are there differences in ongoing home-ownership costs? Are mortgages more expensive for one than the other?
When you buy a single family house, you own it all. The walls, the roof, the fixtures and fittings, the yard, the driveway from boundary to boundary, it is all yours. In fact, you are the only one responsible for maintaining and perhaps improving it. Whereas, condos are not like that.
What Is A Condominium?
When you buy a condo, you purchase your unit, which might be in anything from a duplex to a tower block, or a sprawling development of several blocks. Besides your own unit, you also become part owner of the common areas and any common facilities and services. This might include landscaped areas, paths and driveways, parking areas or garages, and lobbies, elevators and hallways that provide access to units.
If your building provides your unit with heating or HVAC, that could be regarded as a common facility. A doorman or janitor could provide a common service.
You are obliged to contribute your share of the costs of maintaining and perhaps improving those common provisions. That typically happens through a homeowners’ association (HOA). You must also comply with the covenants, conditions and restrictions (CC&Rs) that apply to your property.
What Do You Actually Own?
You need to check your CC&Rs before you buy a condo to see what is going to be yours and what is common. They will also tell you about any restrictions on the use of your property. This might include rules about pets, using your home as a workplace or causing a noise or other nuisance.
For example, the building’s exterior walls and roof are usually common. But your ownership of interior walls that divide your unit from another could be only drywall deep. Read your CC&Rs carefully so you know what you are buying.
When Buying A Condo Or A House, And Figuring Out If A Condos Or A House Is The Better Option
There are three main reasons some home buyers prefer buying a condo over a house:
1. Carefree Living
Firstly, you do not have to mow the yard, and you do not have to clean the gutters. Secondly, you do not have to fix the roof or have to clear the sand. Finally, you do not have to paint your home’s exterior.
True, you have to pay people to do this work. But you are sharing the expense with others in your development. Alternatively, this can work out cheaper than employing various contractors to do the same things for your own house. Those who hate such chores or who are no longer up to doing them, often love the condo lifestyle.
2. Lower Purchase Prices
This clearly depends on the unit, the development and the area. But condos typically have lower purchase prices than comparable houses, especially in areas where home prices are high. Check online to see if that applies where you live.
3. Ready Made Friends
Many condos have a real community feel. Of course, many neighborhoods do, too. But you tend to live in closer proximity with your neighbors in a condo development. Moreover, you are more likely to bump into folks in common areas and elevators. So it can be easier to make friends.
Even Condos Have Their Downsides
But there can be some downsides to buying a condos. Especially, some of these downsides can be more serious than other, but here are some downsides you should not ignore or put off till the end.
1. Broke Homeowners’ Association
If your (HOA) has insufficient funds to carry out urgent perhaps major repairs, you could suddenly be required to pay a large lump sum to cover your share of the costs. This is called a special assessment. Well run (HOA) build reserves over time, so that such expenses can be paid painlessly. But some are in better financial shape than others.
You need to dig deep into the (HOA) finances before you commit to buying a condo. If you purchase with a mortgage, your lender will do the digging for you, to protect its own interest.
2. When The Living Is Not Easy
Living close with your neighbors can foster a community spirit and help build friendships. But it could also drive you mad. A combination of noisy neighbors and poor sound insulation can be especially trying. Additionally, if you end up next door to someone difficult or unpleasant, you are stuck.
3. Paying For Things You Do Not Want
Some developments come with clubhouses, swimming pools and fitness centers. That is great. If you use them. However, they are less appealing if you do not, but are still contributing to the running of them.
Condos And Mortgages
It is usually not hard to get a mortgage for a condo, providing you meet the usual lending criteria. In addition, you will need to know about the two condo mortgage rules you need to know warrantable & non-warrantable. But you may not get quite as good a loan deal as if you were buying a house. This is important to you in two ways: First, you might end up paying more for your loan and so might the potential buyers when you come to sell. Particularly, condo prices may be lower partially because fewer buyers are willing to live with less good mortgage deals.
In fact, here are some ways in which mortgages can be less good for condo buyers:
1. You Cannot Borrow As Much
Monthly (HOA) fees count as a continuing debt when lenders calculate your debt to income (DTI) ratio. A poor one of those can see getting offered a smaller mortgage or a higher mortgage rate. However,some programs are more flexible than others.
2. You May Need A Bigger Down Payment
If you need your down payment to be as small as possible, you may find a condo a bad bet. For example, Freddie Mac excludes condos from its three percent down Home Possible Advantage mortgage. In fact, it imposes restrictions on them for its five percent down Home Possible mortgage.
The Federal Housing Administration has loans for condos that it has approved. Besides you will want to apply for one so you are pre-approved before buying a condo or a house.
3. You May Pay A Higher Mortgage Rate
Some mortgages come with loan level pricing adjustments or (LLPA)s. These are hikes on the standard mortgage rates that you might otherwise have been offered and they are added to compensate for extra risk. Some lenders add an (LLPA) for condo purchases, though not on FHA, VA or USDA loans. For example, Fannie Mae, adds 0.750 percent for condos purchased with down payments below 25 percent.
If the condo you choose is not approved with Fannie Mae, Freddie Mac or any government backed mortgage programs or other mortgage programs, you will likely pay higher interest rates and fees to finance it.
Buying A Condo Or A House?
You should choose your next home based on a broad range of criteria. If you think you will enjoy the lifestyle, and you have checked out your mortgage options. Such as the development of the unit and the (HOA)’s finances then go for a condo unit.
After all, you can end up with bad neighbors or unexpected repairs and maintenance costs if you buy a house. Different people want different things from life. Choose the one you think will make you happier.