Condominiums tend to be more affordable than traditional single-family homes. You will find condos within communities of other units, despite each condo having a single, private owner. While you may own a unit, you share common areas with other owners.
Condo financing does look similar to traditional financing for a single-family loan, but there are extra considerations.
Higher interest rates
Regarding interest rates, expect to pay between 0.125 percent to 0.25 percent more than you would for a traditional mortgage. Lenders consider condos to have a higher risk because of the HOA. All condos have a homeowners association or condo association. The borrower has no control over the association’s rules, and the lender views that as riskier than a homeowner with complete control of the property.
More documentation
When you ask for a loan, your lender will ask you for more documentation than if you had a traditional home. The lender must obtain documents from the management company, HOA or condo association. The lender may ask for information on the units and how many have single owners and how many have renters. Additionally, you may need to provide the condo association’s master insurance policy and information about the condo project. Lenders can deny you the loan if the condo association does not have adequate insurance coverage.
When choosing a condo, remember that your lender has to accept you and the condo association. While there may be more work involved in obtaining a condominium, you will benefit from having less maintenance to worry about.