Key Takeaways
- Condos require HOA fees for shared maintenance and amenities.
- Condo owners only need to insure the interior of their condo unit.
- The HOA manages common areas of the building
- Lenders offer different mortgage options for non-warrantable condos.
Article Summary
A condominium, often shortened to "condo," is a type of residential property in a larger building or complex where each unit is individually owned, and common areas are jointly owned.
Condominium: Explained in Plain English
Condominiums are groups of homes, governed by an association of elected homeowners. They can exist in apartment buildings, and as townhouses or homes in a neighborhood.
When you own a condo, you own everything within the walls of your home, plus a percentage of the areas common to the community.
Common areas in a condo association can include:
- Streets and parking garages
- Hallways and elevators
- Gyms and grassy areas
For example, if a condo community contains a common elevator, each condo owner owns a percentage of the elevator. If it contains a shared yard, each owns a percentage of the yard.
Condominium owners elect a Homeowners Association (HOA) to manage common areas and keep the community running smoothly. The HOA makes rules for the members and maintains a master condo policy to insure the common areas of a building against damage.
Because condominiums are communities, mortgage lenders underwrite them differently from detached and multi-unit homes.
Condo communities that meet basic financial, operation, and safety standards are known as warrantable condos. Home buyers in warrantable condo buildings can usually access a full menu of mortgage products, including fixed-rate and adjustable-rate conventional, VA, and FHA mortgages.
Communities that do not meet warrantable condo standards are known as Non-warrantable condo. Non-warrantable condo mortgage options are limited.
Condominium: A Real World Example
Imagine a first-time buyer who enjoys living in an apartment because of the community feel and amenities like an on-site gym and pool but wants the benefits of owning a home.
They decide to buy a condo. Buying a condo lets them live in the type of building they want, while also potentially building wealth through their home's value increasing over time. This didn't happen as a renter where any increase in value went directly to the landlord.
Plus, as a condo owner, they get more freedom than a renter. The buyers can change the look of their home, renovate it, and upgrade appliances. They can also be a pet parent, which most landlords restrict or disallow.
These freedoms are a big part of why owning a condo appeals to them.
Common Questions About Condominium
Frequently asked questions about condominiums and how condo ownership works.
