In the midst of the ongoing uncertainty caused by the COVID-19 pandemic, the real estate market continues to show resilience. Total existing-home sales saw a significant increase of 20.7% from May 2020, and year-over-year, sales have only dipped by 11.3%. This might lead you to wonder, "How is this possible?" Despite the unpredictable future, the real estate sector has swiftly adapted to a new model of homebuying—virtual. With the aid of virtual open houses and meetings, buyers and sellers can collaborate effortlessly with their real estate agents and lenders to emulate an almost identical home buying experience. Coupled with the fact that mortgage rates recently plummeted below 3 percent for the first time in half a century, the remaining unpredictability of 2023 could paradoxically make it an opportune moment to become a homebuyer. However, if you are still contemplating whether to purchase, you are not alone.
Understanding Condominiums: The journey to homeownership is not an overnight expedition. It entails saving for a down payment, picking the suitable loan, and discovering a home that meets all your prerequisites—a process that requires time. Fortunately, there are a variety of loans and home types tailored to your needs and long-term financial ambitions. An often-overlooked option by new homeowners is the condominium, or condo for short. So, what distinguishes a condo from other types of homes? In simple terms, condos are typically a larger unit partitioned into separate living spaces. Each division boasts the amenities of a standard house, but some facilities might be communal, like a driveway, backyard, or gym. While condos share more similarities with apartments than houses, they can be owned and frequently come with amenities like dog parks, swimming pools, and gyms. Ownership, however, usually applies only to the interior unit, not the land it occupies.
Perks of Condominium Living: Think of a condo as a stepping stone for first-time homeowners. Buying a condo is an excellent intermediary for young purchasers who are keen on investing in equity rather than spending their money on rent. The benefits of condo living can vary based on location, but prospective buyers should note: condos can appreciate over time, similar to single-family homes. Just be cautious about high homeowners' association (HOA) fees that could negate the appreciation value over time. They offer similar features to other styles of houses but at a significantly reduced cost. According to the National Association of Realtors (NAR), median house prices in 2018 were $10,000 higher than those of condos. Lastly, condos often provide amenities that houses do not, such as gyms, spas, tennis courts, yard care, and additional security.
Drawbacks of Condominium Living: Like all things in life, condo living comes with its share of disadvantages, such as proximity to neighbors and potential hikes in condo fees. Before settling for this lifestyle, it is wise to consult your real estate agent about all available options and ask pertinent questions.
Financing Opportunities: Loan prerequisites can vary based on the type of loan, even if the rates are comparable. Available loans for condos include FHA, USDA*, VA, among others. However, the regulations tied to qualifying for each loan can sometimes worry lenders. For instance, to qualify for an FHA loan, the condo must meet detailed FHA requirements laid out in a complex, 100-page document. This does not signify denial, but rather it suggests potential borrowers should be prepared for a potentially rigorous process. You might be curious about why condos pose a financial risk. The reason is that in owning a townhouse or house, you have sole ownership of the entire property, including the land. Regrettably, with a condo, other tenants can pose a risk to your mortgage. If the market plunges or the Homeowner's Association fails to perform necessary renovations and repairs, you could become one of the few remaining tenants. This scenario poses a financial risk to the lender. When the value of individual units decreases, so does the lender's investment.
With historically low rates and the appealing features that come with condo living, you might be considering your next move. That's where we, at Crosscountry Mortgage, come in. Reach out to a local Mortgage Advisor today for a contactless, no-commitment consultation.
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