Should Your First Home Be A Condo

Condos can provide many advantages for homeowners with particular needs, but they also have a few drawbacks to consider in comparison to a single-family home or townhome. Let’s take a closer look at what a condo is, along with the pros and cons of buying one.

What Is a Condo?

A condo, or condominium, is a single-unit home attached to at least one other unit, and is part of a larger residential community. Similar to apartment complexes, condo developments typically have several units that are inhabited by residents who live in close quarters and share common areas. The shared areas often include gyms, pools, playgrounds, tennis courts, and more. However, unlike apartments that can only be rented, condos can be leased or purchased. While condos can be a great first home in some situations, they have also become attractive investment prospects for house flippers. They are often more affordable than single-family homes, cheaper to renovate, and less likely to have unforeseen structural problems.

Types of Condos

When shopping for condos, you will likely come across a variety of layouts. The main condo types are:

Low-rise residential condos: Single-unit buildings with separate entrances for each unitMulti-unit buildings: A complex with two to four units per building regardless of the number of floors, or a complex with five or more units per building with no more than two floorsHigh-rise residential condominiums: Condo complexes with five or more units per building and three or more floors

The right type of condo for you will depend on if you prefer a smaller or larger community, multiple floors or just one, and more or fewer units in your building.

Pros and Cons of a Condo

Pros Explained

Security: Living in a community with security and other residents can grant you more peace of mind than living in a home where security is your responsibility alone. Affordability: The median price of condos is about 25% less than a single-family home, which can make them easier to afford as a first home. They can also be easier to renovate and flip due to the lower costs. Desirable location: Condos are often in urban settings near city centers, which can be great for those who want to be near work, school, shopping, and entertainment. Low maintenance: The property outside of your unit is maintained by the HOA, which creates a low-maintenance living situation for condo owners. On-site recreational amenities: High costs prohibit many homeowners from having on-site amenities such as a pool, gym, or tennis court. As a condo owner, the community-living aspect makes them possible and more affordable. Social benefits of a community: Living in a condo makes you part of a community, which can lead to a new social circle and regular social events.

Cons Explained

Shared walls, floors, and ceilings: Living close to others can result in some sound disturbances that disrupt daily life. HOA fees: Condos typically have homeowners’ associations (HOAs) to manage and maintain the property, which require owners to pay monthly dues. Unaligned values, rules, priorities, and/or management practices: HOAs put rules in place for condo complexes and their residents. Living in a community can become problematic if you don’t agree with the values, rules, priorities, and management of the complex. No land: Unlike when you buy a single-family house, typically with a condo, you will not own the land. Limited space: Condos are generally smaller than houses, which some people may find too restrictive for their needs.

How To Shop for a Condo

If you’re in the market for a condo, do your homework before making an offer. One condo complex may be the ideal fit, while another could fall short. For example, you’ll want to look for condos with communities that align with your lifestyle and that don’t have excessive complaints from other owners. Here’s a list of questions to consider when shopping for a condo to ensure you find the right one for you:

What area do you want to live in? What is your price range? Do the condos you like qualify for financing (FHA, VA, USDA, Fannie Mae, Freddie Mac)? What type of condo do you want? Is the community pet friendly, family friendly, etc.? What amenities are important to you? How much are the HOA fees? Will the rules and regulations align with your lifestyle? Is the community one that you will enjoy? Do you share similar interests? Does the complex have more owners or renters occupying the condos? How is the resale value of condos in the complex? Are other owners in the complex happy there? Do they have any complaints? Are the grounds well maintained? What percentage of the units are past due on HOA fees, if any?

By vetting condos with questions like these, you can work with your real estate agent to make a shortlist of condos that will make for a suitable first home. Tour your favorite properties on the market to make your final decision.

How To Finance a Condo

Financing a condo is possible, but it might be a bit more complicated than financing a home. Your condo is just one part of a larger community, and its value depends on the health and stability of the larger condo development. Lenders—or those backing the loans—often want to evaluate the condo project as a whole. For example, the U.S. Department of Housing and Urban Development (HUD) requires condos to meet a wide range of requirements to qualify for Federal Housing Authority (FHA) loans, including:

Projects must be at least 75% residential.At least 51% of the units must be owner-occupied.Developers can’t own more than 49% of the total units at the time of approval.Adequate funding must be available for insurance coverage and deductibles.

That said, FHA, Veterans Affairs (VA), United States Department of Agriculture (USDA), and conventional loans can all be used to finance condos as long as the condo developments meet their respective requirements.