4 Things to Know About Buying a Condo

Is a condo right for you?

Condominiums are an alternative to single-family homes or townhouses. They are similar to apartments in that you have a unit in a shared building where there are often many other units. But when you buy a condo, you own it rather than rent it.

If you're considering a condo, there are a few things to know before you buy.

1. Getting a mortgage can be harder

It can be more difficult to qualify for a mortgage to purchase a condo rather than a single-family property. And mortgage loans for condos tend to have higher rates and larger down payment requirements.

There's a simple reason: Mortgage lenders view these loans as presenting a higher risk than loans for single-family homes. And the riskier a lender considers a loan, the more difficult it becomes to qualify, and the higher the interest charged.

2. Condos aren't always cheaper

One big reason people are drawn to condos is that they often come at a lower price than other options. And they are often less expensive than comparable single-family homes, but this isn't always the case. A lot depends on the market in your area, what home buyers are interested in, and the amenities and features of a property.

If you live in an area where there's a high demand for condos and a limited number of them, it might end up costing you more -- especially when you factor in the possibility of a higher interest rate. Carefully research prices in your area to determine whether a condo or single-family home presents the best deal.

3. You may have association dues

Condos generally have homeowners associations or condo associations. They maintain common areas and enforce the condo complex's rules.

Unfortunately, in many cases, the dues are high. This is especially true if the complex needs a lot of expensive upgrades and the association needs to levy a "special assessment" -- an extra fee for major projects.

4. There may be lots of restrictions

Often when you live in a condo, you share your space closely with others. As a result, associations can have many rules and restrictions. These rules might relate to everything from the number and size of allowed pets to whether you can rent out your condo unit.

Make sure you're comfortable with any restrictions up front -- and be aware that new rules could be added you might then be bound to live by. If you don't want to give a lot of control over what you can do with your home to a condo association, a condo may not be the right choice for you.

By considering association dues, association rules, condo values, and the cost of a mortgage, you can maximize the chances you'll be happy in your choice to purchase a condo.