What is a good debt-to-income ratio for a mortgage?
Debt-to-income ratio is the portion of your income that goes toward paying debts. DTI affects how much house you can afford. Learn how to calculate.
Diana Flowers
These loans can be trickier to get than typical mortgages
Condominiums offer many of the same benefits as single-family dwellings — but without all the maintenance and upkeep that traditional homes require. Condominiums also tend to be less expensive than traditional homes, which adds to their appeal. The National Association of Realtors (NAR) points out that the median existing condo price nationally worked out to $337,300 in March 2023, whereas the median price for an existing single-family home was $380,000.
NAR’s 2022 Profile of Home Buyers and Sellers also revealed that condominiums are popular with senior citizens, with 17% of buyers over the age of 60 buying a condominium.
If you're considering buying a condo over other housing options, you do need to know that mortgage interest rates tend to be higher for condos than for single-family homes. There are also additional barriers associated with condo mortgages that buyers usually don’t have to face with traditional home loans.
Here’s what you need to know about how condo loans work.
Before diving into the ins and outs of condo mortgages, you should know what sets condominiums apart from other types of housing. Generally speaking, a condominium is a home you own within a building or complex of buildings that features multiple units. The U.S. Census Bureau notes that condominiums are distinguished from other types of housing because they’re individually owned but share jointly owned spaces.
Think of a condo as an apartment you own instead of rent. However, you only own your individual unit, and you own a percentage of common areas alongside other condo owners in your condominium association. Like traditional homeowner associations, condo associations are responsible for the maintenance and operation of shared areas of the building and shared outdoor spaces.
Getting a condo mortgage may be more challenging than getting a single-family home mortgage for a number of reasons.
» MORE: What is a conventional mortgage?
When it comes to condo mortgages, you can use the same loan types as you can for a single-family property. For example, you can use conventional loans, FHA loans, VA loans, USDA loans and jumbo loans to purchase a condominium as long as the specific loan and property requirements are met.
Fannie Mae and Freddie Mac have guidelines much like those set by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) for financing condos, albeit with some minor differences.
To be approved for an FHA loan, your condominium must meet the following requirements:
To qualify for the VA loan program, the condo development must meet the following criteria:
USDA loans have guidelines that are similar to those set by the FHA and VA, including:
Condos are a popular option with those who appreciate apartment-style living, shared spaces and limited maintenance and repair responsibilities. If you want your own yard — and you want to take care of it — then a condo might not be for you. Condo living also means depending on a property management company to take care of the property and any issues that arise.
The pros of a condo include:
There are several downsides to condos:
» MORE: Tax deductions for homeowners
According to Jay Dacey, president of Jay Dacey Mortgage Team in St. Paul, Minnesota, interest rates and closing costs for condos can be slightly higher than rates and closing costs for single-family homes because of the additional risks that condos present to mortgage bondholders. However, the difference in rates may be insignificant and can depend on a broad range of factors.
Like other types of home loans, condo mortgages typically last from 10 to 30 years. Ultimately, the length of a condo mortgage depends on what the borrower wants and can qualify for.
According to the National Association of Realtors, the median existing condo price nationally was $337,300 in March 2023. This is lower than the median price of existing single-family homes that month, which was $380,000.
According to the Consumer Financial Protection Bureau, condo fees typically aren’t wrapped into a mortgage payment. Instead, they’re paid directly to the condo association.
A kiddie condo loan is a loan backed by the Federal Housing Administration that lets parents be co-signers on their child's mortgage, making them joint owners of the condo.
Condos can be a good investment for many, but they do come with stricter mortgage approval guidelines. They’re generally cheaper than single-family homes, though, so if a condo suits your needs and you meet a lender’s requirements for a condo mortgage, you could save in the long run.
Just know that you’ll have to deal with monthly association fees on top of a potentially more difficult loan process. If this is a deal-breaker for you, you can always consider other housing options, like single-family properties.
Debt-to-income ratio is the portion of your income that goes toward paying debts. DTI affects how much house you can afford. Learn how to calculate.
Diana Flowers
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