Condo Buying Guide: What to Know Before You Buy

Buying a condo can give you the benefits of homeownership without some of the exterior maintenance that comes with a detached house. But you’re not buying only the space inside your unit. You’re also becoming part of a condominium project with shared property, expenses and rules.

That makes condo shopping a little different from buying a conventional detached home. Before making an offer, understand what you own, what the association maintains and how the project’s finances can affect you.

Key Takeaways

1. A condominium is a form of property ownership, not a particular architectural style.
2. Condo owners generally own an individual unit while sharing rights and responsibilities for common elements through the condominium association.
3. Monthly HOA dues should be included when comparing the total cost of different homes.
4. Your lender may need to evaluate the condominium project as well as your individual mortgage application.
5. Review association finances, insurance, rules, special assessments and major planned repairs before buying.

What Is a Condo?

A condominium, usually shortened to condo, is a form of real estate ownership in which individual units are separately owned while certain portions of the property are held or managed collectively.

Common elements can include:

• Hallways
• Elevators
• Roofs
• Exterior walls
• Landscaping
• Parking areas
• Pools
• Fitness centers
• Other shared amenities

The condominium declaration and other governing documents establish exactly where the individual unit ends and the common property begins.

A condo does not have to look like an apartment. Condominium ownership can apply to apartment-style buildings, townhouses and even detached homes.

If you’re comparing housing styles, our overview of the different types of homes explains the broader distinctions.

Condo vs. Apartment vs. Co-op

These properties can look similar from the outside, but the ownership arrangements are different.

A townhouse creates another common point of confusion because townhouse usually describes architecture rather than ownership. A townhouse can legally be a condominium. Our townhouse vs. condo comparison explains that distinction.

What Do You Actually Own When You Buy a Condo?

You own the condominium unit as it is legally defined in the project’s governing documents.

You also receive the rights associated with the project’s common elements, but you generally do not individually own hallways, elevators, roofs or other shared portions of the development in the same way you own your unit.

The details vary by project.

A balcony, patio, parking space, window or exterior door might be:

• Part of your individual unit
• A common element
• A limited common element reserved primarily for your use

Those distinctions matter because they determine who is responsible for maintenance, repairs and insurance.

What Is the Condo Association?

The condo association manages the shared interests of the condominium project.

Its responsibilities may include:

• Collecting owner assessments
• Maintaining common property
• Purchasing master insurance
• Managing reserves
• Hiring vendors
• Enforcing community rules
• Planning major repairs

Owners fund those activities through regular association assessments, often referred to as HOA or condo fees.

The quality of the association’s financial planning can matter substantially. An association that has not adequately planned for a roof, elevator or structural repair may eventually need to increase dues or impose a special assessment.

What Do Condo HOA Fees Cover?

There is no standard list.

Depending on the project, your monthly dues might help pay for:

• Exterior maintenance
• Landscaping
• Building insurance
• Water
• Trash service
• Elevators
• Security
• Snow removal
• Pools or fitness facilities
• Professional management
• Contributions to reserves

Always ask what is included rather than comparing HOA fees by dollar amount alone.

A higher fee that covers substantial maintenance and utilities may represent a very different cost structure from a lower fee that leaves owners responsible for more expenses.

How Much Condo Can You Afford?

Do not base your budget on the purchase price and mortgage payment alone.

Your recurring housing costs can include:

• Mortgage principal and interest
• Property taxes
• Homeowners insurance
• Mortgage insurance, if applicable
• Condo or HOA dues
• Utilities

A home affordability calculator can help you compare those costs with your income and other monthly debts.

Also leave room for potential HOA increases and special assessments rather than assuming today’s association fee will remain unchanged for as long as you own the condo.

Is Financing a Condo Different?

It can be.

When you buy a detached house, mortgage underwriting primarily focuses on you, the transaction and the property securing the loan.

With many condos, the lender may also need to evaluate the condominium project.

Depending on the loan and project, that review can consider issues including:

• Project insurance
• Financial condition
• Special assessments
• Critical repairs
• Owner assessment delinquencies
• Project completion
• Legal or ownership issues

That means a buyer can qualify financially for a mortgage while a problem with the condo project creates a separate financing issue.

If you’re serious about a particular unit, give your lender the property information early enough to identify potential project issues before closing.

Can You Buy a Condo With a Conventional Loan?

Yes. Eligible condo units can be financed with conventional mortgages.

Fannie Mae, for example, maintains specific project standards for loans secured by condo units. The type of project review required can depend on factors including the size and status of the project and the mortgage transaction.

Conventional financing can therefore be an option for condo buyers, but borrower approval does not automatically establish project eligibility.

Can You Buy a Condo With an FHA Loan?

Yes, if the borrower, unit and project satisfy applicable FHA requirements.

FHA financing can be available for units in FHA-approved condominium projects. FHA also provides a Single-Unit Approval process that can allow certain individual units in otherwise eligible projects without current FHA project approval to qualify.

Ask your lender about the specific project rather than assuming that every condo either accepts or rejects FHA financing.

What Should You Research Before Buying a Condo?

Once you find a unit you like, shift some of your attention from the condo itself to the project.

Review available information about:

• Current HOA dues
• Association budget
• Reserve funding
• Recent or pending special assessments
• Major planned repairs
• Association insurance
• Recent board meeting minutes
• Rental restrictions
• Pet policies
• Parking rules
• Renovation restrictions
• Owner maintenance responsibilities

Our more detailed guide to researching a condo before you buy walks through the financial statements, insurance, reserves and project-level issues in greater depth.

Can You Rent Out a Condo?

Possibly, but buying a condo does not automatically give you unrestricted rental rights.

The condominium documents may limit:

• Whether units can be rented
• How many units can be rented at once
• Minimum lease terms
• Short-term rentals
• Tenant registration

Local laws can also affect which restrictions are enforceable.

If future rental income is part of your buying plan, review the project’s current rental rules before purchasing rather than assuming you can lease the unit later.

What Are the Advantages of Buying a Condo?

Less Individual Exterior Maintenance

In many projects, the association handles common exterior areas and major shared components.

That can reduce the amount of exterior maintenance an individual owner needs to coordinate personally.

Access to Amenities

Depending on the development, condo owners may share amenities such as:

• Pools
• Fitness centers
• Clubhouses
• Outdoor spaces
• Security services
• Parking facilities

The cost of maintaining those amenities is generally reflected in association expenses.

Potential Access to Different Locations

Condos are common in dense urban neighborhoods, resort areas and other locations where detached homes may be limited or considerably more expensive.

For some buyers, a condo can therefore provide access to a location that would otherwise be difficult to afford.

Homeownership Without a Large Lot

If you do not want to maintain a yard or large exterior property, condominium ownership may fit your priorities better than a detached house.

What Are the Drawbacks of Buying a Condo?

Ongoing Association Dues

HOA dues continue as long as you own the property, including after the mortgage is paid off.

Special Assessments

Owners can sometimes face additional assessments when the association needs money for significant repairs or other expenses.

Community Rules

You may have less freedom to make exterior changes or use the property in certain ways than you would with a detached home outside an HOA.

Shared Financial Risk

Your unit is part of a larger project. Problems involving insurance, deferred maintenance or association finances can affect owners throughout the development.

Less Privacy

Many condos share walls, ceilings, floors or common areas with neighboring units, although the amount of privacy varies dramatically by development.

How to Buy a Condo Step by Step

1. Establish Your Total Housing Budget

Include HOA dues and other condo-specific expenses when determining what you can comfortably afford.

2. Get Preapproved

A mortgage preapproval can give you a clearer idea of your borrowing range before you start making offers.

Tell the lender that you’re considering condos so you can discuss any property-specific financing requirements early.

3. Compare Condo Communities

Do not compare units solely by square footage and list price.

Consider:

• Location
• HOA dues
• Amenities
• Parking
• Building condition
• Association rules
• Noise and privacy
• Maintenance responsibilities

4. Make an Offer

Once you find a condo that fits your needs, make an offer based on the property, market conditions and your financing.

Your purchase agreement may provide opportunities for inspections and review of association documents, depending on applicable law and the contract.

5. Review the Condo Documents

This is one of the most important condo-specific steps.

Study the association’s finances, rules, insurance, assessments and planned projects. Pay particular attention to anything that could materially increase your costs after closing.

6. Inspect the Unit

A condo still deserves a home inspection.

The inspector can evaluate accessible components within the unit and may identify signs of larger building issues that warrant further investigation.

7. Complete Mortgage and Project Review

Your lender finishes underwriting your application while completing any required evaluation of the condo project.

8. Complete Your Final Review and Close

Before closing, make sure you understand the final mortgage terms, HOA costs, insurance responsibilities and any assessments you will assume as the new owner.

What Should You Look for When Touring a Condo?

Don’t limit your tour to the unit itself.

Walk through the broader property and look at:

• Hallways and common spaces
• Exterior condition
• Parking
• Elevators
• Landscaping
• Pool or fitness facilities
• Trash and storage areas
• Signs of water intrusion
• Visible deferred maintenance

Also spend a few minutes listening.

Shared-wall construction varies substantially, and a quiet unit during a short showing may feel different during evenings or weekends.

Is a Condo Right for You?

A condo may fit your needs if you value:

• Less individual exterior maintenance
• Shared amenities
• A smaller personal outdoor footprint
• Locations where detached homes are scarce or expensive
• A lock-and-leave style of homeownership

You may prefer another type of home if you place greater value on:

• A large private yard
• Greater separation from neighbors
• Control over exterior renovations
• Fewer community restrictions
• Avoiding mandatory association dues

If you like attached housing but want a more house-like layout, you may also want to compare a townhouse or patio home.

Bottom Line

A condo can provide homeownership, shared amenities and less individual exterior maintenance, but you’re buying into more than an individual unit.

Association finances, rules, insurance, maintenance and project condition can all affect your costs and experience as an owner.

Start by deciding whether the condo lifestyle fits you. Once you find a particular unit, investigate the project before committing to the purchase and involve your lender early enough to identify any financing concerns.

FAQ

What is the difference between a condo and an apartment?

A condo is individually owned real estate within a condominium project. An apartment is generally a unit rented from the owner of the property. The buildings can look nearly identical even though the ownership is different.

Do condo owners own their units?

Yes. Condo owners generally hold title to an individual unit as defined by the condominium documents, along with rights and obligations involving the project’s common elements.

Do condos have HOA fees?

Condominium associations generally collect assessments from unit owners to pay for common expenses. The amount and services covered vary by project.

Can you rent out a condo?

Possibly. Condo associations may impose rental restrictions, minimum lease terms or short-term rental rules, subject to applicable law. Review the current governing documents before buying if renting the unit is important to you.

Can you get a conventional mortgage on a condo?

Yes. Eligible condominium units can qualify for conventional financing. Depending on the transaction and project, the lender may also need to determine that the condominium project satisfies applicable mortgage requirements.

Can you buy a condo with an FHA loan?

Yes. Eligible units in FHA-approved condominium projects can qualify, and FHA also provides a Single-Unit Approval process for some units in otherwise eligible projects that do not have current FHA project approval.

Should you get a home inspection when buying a condo?

Yes. An inspection can identify issues within the unit and may reveal signs of broader building problems that deserve additional investigation.

What should you review before buying a condo?

Review the HOA dues, budget, reserves, insurance, special assessments, major planned repairs, governing documents and recent association information available to you. You should also understand exactly which portions of the property you are responsible for maintaining.