Financing Tips For Buying a Condo

What Makes a Condo Special?

Condos have several advantages for people living on a tight budget, and for people who are living in a tight or expensive real estate market. The first advantage is that condos are generally priced lower than single family homes are. This makes condos more accessible to first time home buyers and to people who are living in an expensive real estate market like Miami. The second advantage is that the maintenance of the grounds and the building are typically covered by your condo association fees. This reduces the amount of upkeep work that you will be responsible for, and it reduces the chances that you will be faced with a large repair bill in the future. These are major advantages for both busy professionals and for busy working families. Finally, it is usually easier to find a condo unit for sale than it is to find a single family home for sale in popular real estate markets. This makes a condo a great option for college students, for doctors working on their residency requirements, and for professionals relocating to a new city.

What to Consider When Financing a Condo

Like financing any other type of real estate property you need to evaluate all of your monthly expenses in order to determine your condo shopping price range. With a traditional home your mortgage expenses will generally include the purchase price, property taxes, and home owner's insurance. However, with a condo you will also need to take into consideration your condo association fees. These fees can add several hundred dollars a month to your housing expenses. It is important that you factor these fees in when creating your condo shopping budget.

Available Options for Financing a Condo

Condos can typically be financed just like a regular single family home. You can take out a traditional loan, you can take out a first time home buyers loan, or you can use a piggy back mortgage like an 80/20 loan. You may also be offered owner financing. In this case the previous owner of the unit, or the owner of the condo development, will carry the loan for you. This is a great option for people who are having troubles finding a traditional lender.

Selecting a Financing Option

In order to select the best financing option for your condo purchase you need to compare both the upfront costs and the carrying costs of each financing option. If you have a substantial amount of money available to cover upfront costs then it is a good idea to select a loan product that will reward you for investing more of your money upfront. You will generally get a better interest rate and better terms when you use this strategy. However, if you don't have a lot of money to invest upfront then you will need to look for a mortgage product that has the best interest rates and the lowest upfront fees and closing costs.