Condos vs. Single Family Homes
There are many differences between a condo and a single family homes. If a person isn’t used to yard work or to handling repairs on his own, a condo might be a better option. With a condo you will be paying a monthly maintenance fee that generally covers exterior maintenance, amenities, management company and insurance for exteriors of buildings and common areas. You are responsible for the insurance of the interior or the condo, but it generally cost less/year than insurance on a single family home.
Condos typically come with a wide range of amenities that are very rarely found in single family homes. Most condo buildings also have gyms and swimming pools for residents to use and a receptionist and security who only lets authorized people into the building.
Single family homes are more suited to people who are ready to handle all aspects of homeownership themselves. When a person buys a single family home, he is responsible for maintaining all areas of the property. If there is a small yard, he’ll have to keep it up. If there is a problem with plumbing or A/C etc., the homeowner is responsible for fixing it or for calling a professional.
The board or homeowner’s association in a condo building has a say in what an owner can or can’t do with the condo. Some buildings put restrictions on the number of pets a person can have in the condo or prohibit pets entirely. A condo building might also require certain types of flooring, to muffle noise, or state what people can or cannot put on their balconies. Condo homeowner association rules may restrict how you use the property, and may restrict or even prohibit renting your condo unit.
Owners of single family homes have complete control over the number of pets they own, renovation decisions, and can rent anytime of period with no restrictions.
Single family homes offer a level of privacy not found in condos. When you buy a condo, you are buying a set amount of space in a building. You’ll share walls, a ceiling, and a floor with your neighbors. While most condo owners respect others’ privacy, there is still the chance that you’ll be able to hear your neighbor’s television or music through the walls or their footsteps through the ceiling. The closeness of neighbors in a condo means people are more likely to run into each other while going in and out of their homes or entering and leaving the building. Some people like that, as they feel it builds a sense of community. Some people don’t like that as they feel they have no privacy.
Financing in General
Getting a mortgage on a house vs a condominium can be very different. The biggest difference between financing a single family home and a condo is that with a condo you will be required to purchase a Home Owners Association Certification. This certificate tells the lender a number of things that could affect their decision to lend in that development. The three most common reasons lenders may not lend in a HOA:
- The owner occupancy is not high enough, the current requirement is that at least 51% of the development is made up of owners that live on the site as opposed to investors living elsewhere.
- Too many owners are delinquent on their HOA dues, If more than 15% of the development is more than 60 days late on their dues then the lender may not lend on the property.
- There is pending litigation on property: if there are many pending lawsuits for any reasons most lenders may not lend on that property.
When buying a home it is pretty straight forward. You have variety of choices to choose from, you can choose the type of loan whether it is a conventional, FHA or VA, if you qualify. With a condominium you need to verify upfront that you will be able to use certain types of loan products. As a someone interested in a condo you should because without the ability to get FHA financing quite a few buyers are locked out from purchasing. This of course can affect the long term value of your property.
The advantage to a buyer getting an FHA loan is the fact you only have to come up with a 3.5% down payment. When a condo development is not FHA approved it locks a large percentage of buyers out. . When considering condos, the lenders will ask for the most current condo reserve budget report up front, to see the financial health of the condo association and if they are collecting sufficient reserve funds for future major maintenance and repairs. If the reserve funds are not sufficient then the lender most likely will ask for min. 20% - 25% of a down payment. How many people will have $80K on a $400K condo to put down. vs Where you have an option to put 3.5% $14K (if you qualify) on a house for $400k.
Location, location, location...Condos are often considered easy, low-maintenance options to invest your money, banking on the idea that the condo will appreciate over the years and you will someday be able to sell it for a substantial gain. A appreciation potential is an important factor when investing and the annual costs involved in holding a condo. The financial gain you’ll get from appreciation.
Single-family homes tend to appreciate more than condos, partly because people have a hard time envisioning paying a higher sales price for a property where they have to pay condo fees. Many homebuyers would rather put that money into home improvements of their own choosing. When purchasing a house you own the land and the improvement made to the land. You don’t have to worry about other people bringing down the price of your home if they default on their loans. Its important keep the property maintained.
In the end, it comes down to what works for your lifestyle. For many clients it’s a matter of amenities and convenience versus privacy. I always suggest potential buyers make a list of their needs and must haves before they decide which is a better fit for them and their lifestyle. There is no “right” answer, just what’s right for you!