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Should I Buy a Condo?

August 30, 2022 By: Great Midwest Bank
A young couple carries boxes into a beautiful condo kitchen.

Many people purchase a condominium (or condo) as a relatively affordable, low-maintenance alternative to the traditional single-family home. As with all major investments, there are a few key considerations to understand before committing to a condo.

Condo Living Considerations

Condo life often can feel somewhere between that of homeownership and living in an apartment.
Much like living in an apartment, your condo unit will likely be connected to one or more neighbors – you may live above or below someone, or share a wall. Think about the ramifications of living in an upper versus a lower unit. You also might have easy-going neighbors or you might have difficult ones. Either way, living in a condo will require the same sort of etiquette as any sort of shared living space.

The bylaws will likely detail quiet hours you must abide by, and you may have to resolve issues with neighbors from time to time. Keep in mind that at odd hours of the night you won’t be able to hang up pictures or dance around to Van Halen.

Condo living often can feel somewhere between that of homeownership and living in an apartment.

However, one thing many people love about living in a condo is the fact that they don’t have to mow the lawn or shovel snow off the sidewalk — part of their condo fees go toward hiring people to take care of that. The community aspect can be rewarding too. You may befriend your neighbors and be able to help each other out with pet-sitting, bringing in the mail while the other is away, or opening a stubborn container of gelato.

Dig into the Bylaws and Other Regulations

Since every condo project is different, it is in your best interest to take a deep dive into the bylaws and other standards within that condo project. A condo association’s bylaws outline just about everything you need to know as a condo owner in that community.

For example:

  • What are owners allowed to do/not do with the unit?
  • What do the condo fees cover in terms of services and repairs?
  • Are pets allowed, and what types?
  • Who makes up the board and association members?
  • How are common areas used and maintained?

Let’s look at pets, for example. Some condos may restrict how many pets you can have, and what kind: for example, you may be allowed to have two cats or one dog that’s under 30 pounds. Is that a deal-breaker for you? Perhaps you don’t have a pet of your own, but how will you feel about sharing common areas with people who do?

Read through the entire set of bylaws and regulations before putting in an offer. It’s important to fully understand what you’re getting into if you’re going to be living there.

Fees and Special Assessments

One reason people buy a home in the first place is, well, so they don’t have to rent. That is, it’s an investment; you have a mortgage and can eventually fully own your unit. That’s true, but make sure to factor in that condos come with monthly fees on top of your mortgage payments.

You’ll be paying monthly condo association fees that will go toward maintenance costs: things like lawn care, snow removal, waste removal, repairs in common areas, and so on. On the positive side, it means you don’t have to take care of those tasks yourself. However, it also means you have no real way of knowing year to year whether those monthly costs will remain the same as what they are when you first buy the place. Boards can raise the monthly fees if they feel more money is needed to cover communal expenses.

Condo associations also sometimes pass special assessments in which they collect additional funds from each owner to cover an unexpected expense — something that the association’s reserves won’t be able to cover. Perhaps a roof was severely damaged in a storm and needs to be fixed right away. The association may collect a special assessment to cover the repairs.

To get a better idea before you buy, ask to see how many special assessments have been levied in the past few years and what were they for. The bottom line is that when you buy a condo you’re also accepting responsibility to contribute monthly fees and special assessment fees, should they come up.

Renting Status and Rules

Another important thing to take a look at is the rental situation of the condos. How many units in the project are rented, if any? Condo associations will sometimes allow condo owners to rent out their units because they cannot sell them due to poor market and/or lending conditions.

Owning a condo that is neighbored by several rental units may negatively affect the average condo unit value. Generally, this is because there is more liability; rental units often aren’t cared for as well by their tenants as units occupied by their owners.

On the other hand, perhaps you want the flexibility to be able to rent out your unit later on if you choose to. Before making a purchase, be sure you fully understand whether or not renting will be an option available to you. This will be detailed in the bylaws.

Construction and Maintenance Status

Consider if there any issues with the building construction and/or maintenance of the buildings in the condo project. Not all builders or buildings are created equal. A project with construction issues can often be discovered by analyzing the Condo Association’s previous and current annual budgets — and the minutes to their meetings.

An experienced home inspector can also help you to find any building flaws that could ultimately mean higher monthly dues and/or large, unexpected special assessments. Even so, it may be difficult to get a full and accurate picture of potential problems with each building that you could be charged an assessment for down the line.

Financing Eligibility

It’s important to consider whether the condo is eligible for conventional fixed-rate financing. The answers to the following questions — which are part of a standard questionnaire required by most lenders — will you help make that determination. They are questions you should also consider for your own good as you make the investment in a condo:

  • Is the condo project finished or are there more planned phases?
  • If unfinished, how financially strong is the developer?
  • Are the majority of the units sold or are some vacant and/or rented?
  • Are the unit owners in control of the condo association?
  • Do sufficient reserves exist to cover future maintenance costs?
  • Are other owners keeping up with their condominium dues?

A well-sold project with the majority of units occupied by the unit owners will have a much better chance of qualifying for long-term, fixed-rate financing.

Unfortunately, condos often do not fit all the parameters for conventional or FHA (Federal Housing Administration) loans. If certain standards aren’t met the mortgage loan will not be approved. Many lenders won’t grant a loan of any kind if these standards aren’t met.

At Great Midwest Bank, we provide options for circumstances like this. In addition to fixed-rate financing for qualified projects, we may be able to offer a Portfolio Loan product for those who do not otherwise qualify for secondary market fixed-rate products.

Weighing the Pros and Cons of Buying a Condo

Owning a condominium is definitely the right move for many buyers. It can be an approachable and economical option, especially for single or smaller households. With a condo you’re still investing in your own place, and it may be more affordable than a house. This is, of course, provided that you factor in the additional fees that come with it.

Like many homes, there are tradeoffs. If you buy a condo you don’t own land and likely don’t have a backyard — but maybe the location is smack dab in the middle of the city, right where you want to be. And hey, there’s a park within walking distance anyways. Not to mention, you’re no longer responsible for shoveling snow!

The purchase process for a condo does require more homework for you and your lender. In the end, condos can be a terrific choice if you find one that’s the right fit for you.

Thinking about buying a condo?

If you have your eyes set on a condo, consider Simply Local banking with Great Midwest Bank to finance the purchase. Stop by one of our local branches, talk to a local loan officer on the phone, or visit our site to apply for a loan. We’ll work with you to find a loan product that suits your particular needs. Experience a state of Bankquility™ today with Great Midwest Bank!


A version of this article was originally published in March 2013. It was most recently updated in August 2022.