Condo vs House: Which Is Right for You? The Motley Fool
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This makes most free standing houses considerably more private than a condo. When you buy a house, you get unilateral ownership of the building and the land it sits on. The only exceptions will be spelled out specifically in your deed, such as if someone holds an easement to drive across the property or if you hold joint title. This means that you control the use, occupancy and equity of the entire building and the land.
The process can take 90 days or more, however, so eligible veterans should look for condos that are already approved. Condos must be in “Approved” status and have an approval expiration date in the future. For this reason, there are many approved projects whose approvals are expired. In general, condos typically have better security compared to houses. Before buying a condo, make sure the homeowner’s association is well-run. See if any major improvements to the building are planned and ask how they are being paid for.
Determine If the Property Is a PUD
You use this space subject to the rules set by the condominium’s residents as a whole and share responsibility for maintenance and upkeep. One of the main downsides to living in a condo is that you have significantly less autonomy than you would if you owned a single-family home yourself. Your condo association will likely have rules and regulations that you will have to follow in order to live in the community. For example, ownership of pets might be prohibited or, if allowed, governed by specific rules and restrictions on how many pets you can have and of what species. Condominium mortgage requirements are more stringent than those for a conventional home loan, and the mortgage rates are generally higher as well.
Buying a condo can be more convoluted than buying a single-family home, because you’re purchasing a piece of a community that has a unique set of rules and fees. The condo mortgage process can also get complicated — your lender will consider both your finances and the finances of the condominium community. To do that, the condo project itself must be vetted and meet lender standards. Though you may have to pay monthly HOA or condo fees if you own a condo, these expenses are typically lower than the added costs of owning a single-family home. Most homeowners pay 1% to 4% of their home’s value in maintenance costs every year, with the average annual cost being $3,018, according to Angi.
What are the pros and cons of buying a condo vs a house?
You own the roof, the foundation, the boiler and everything else. This is compounded by the fact that your condo might change the building or its amenities, changing your original investment. With a condo, you still share walls and doors with your neighbors. This means that you have to put up with the noise of other people, their complaints, and all the other concerns of a shared space.
However, there are some key differences in how lenders look at the two types of properties during the underwriting process. As mentioned, condos typically only include the interior of the property, and the land they sit on is considered undivided ownership, which means they own it but aren’t assigned a given percentage. This is why you pay HOA dues when you live in a condo, because money needs to be set aside for certain costs, such as shared utilities , gardening, roof repair, exterior paint, and so on.
Tips For Buying A Condominium
If you have used Bankrate.com and have not received the advertised loan terms or otherwise been dissatisfied with your experience with any Advertiser, we want to hear from you. Pleaseclick hereto provide your comments to Bankrate Quality Control. To sum it up, it’s very important to determine how the subject property is legally defined, along with how the underwriter interprets the property type. It’s generally considered a PUD unit if you own the structure and the land beneath it, which includes a designated lot in the complex or subdivision.
Weigh the costs against the potential benefits of all your options to decide what type of property is right for you. Buying a single-family home could make more sense if you have cash saved for expenses and you want a lawn and walls of your own. Also, if you can make most repairs yourself, home upkeep could cost you less.
Many developments don't care to undergo this step every year, which limits the number of FHA-approved condominiums that are available on the market. Fannie Mae, Freddie Mac and the FHA all have certain standards that condominium developments and their homeowners' associations must meet before they will approve a mortgage to buy a unit there. Among the main requirements of all three is that at least half of the units must be owner-occupied and that no single investor can own more than 10 percent of the units . With a condominium, you have a shared interest in your property with the other residents of the development.
With a single-family home, you don’t typically have to worry about pet restrictions, what you can do with your yard or what colors you can paint your house. If you are looking for more freedom as a homeowner, a condo might not be for you. Additionally, some condo communities may not even have shared amenities you would want to use, so that perk may not even apply in some neighborhoods.
The main difference between condos and apartments isn’t in the structures themselves but in the way they’re owned. Apartment buildings are often owned by a single entity, like a real estate developer or real estate investment trust , and rented to tenants. You own what’s inside your condominium unit, but what’s outside, such as the roof or walkway, is owned collectively by all the homeowners in the building. The distinction is ownership versus renting, with condos being something you own, and apartments being something you rent, assuming you’re not the owner of the entire building. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website.
A condo can make a great starter home, but weigh the pros and cons of buying a condo vs. a house to decide whether it's right for you. We believe everyone should be able to make financial decisions with confidence. All of these things can make getting a mortgage for a condominium a bit more complicated than getting a loan for a single-family home. But they shouldn't be major obstacles, as long as you're prepared for them. Buying a condominium is often the choice of people who value convenience. But getting that convenience means you have to put up with a few extra challenges when it comes to qualifying for a condo mortgage.
The trade-off is that you have to pay COA fees in exchange for never having to mow a lawn. Non-warrantable condos, on the other hand, are condos that don’t meet the lending guidelines of Fannie and Freddie. This can make financing a non-warrantable condo a bit more difficult, and you may have to seek assistance outside of traditional lending options like conventional mortgages. Lenders may also want to see the condo’s proof of insurance, HOA budgets and reserves, and other information that meets lender standards.
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