What to Know When Buying a Condo

If you’re looking for lower-maintenance living that can be budget friendly, a condominium (or condo) could be the right choice for you. Before you buy, it’s important to know what you can expect and how the buying process for a condo differs from that of a detached home.

So, what is a condo?

A condo is an individual “unit” within a larger building or community of other condo owners.

Each condo unit is typically owned by an individual homeowner, with the shared facilities owned by all the condo owners collectively. Condo communities are governed by condo owners associations or homeowners that arrange property maintenance and management.

Apartment buildings have single owners, which may be large companies or smaller entities. The units are also rented. Apartment maintenance is usually overseen by a property manager.

Condo owners make mortgage payments to a servicer, increasing the equity they have in the home. Renters make monthly payments to their landlord that allow them to live in the property but do not confer any equity or ownership.

Unlike owning a single-family home, you jointly own the exterior property and common areas along with all the other owners in the community or building.

Along with the other owners, you will also pay a mandatory monthly “condo fee” that covers general repairs and maintenance to the building’s exteriors and common areas, usually including water, sewer, trash services, and the upkeep of recreational amenities. The condo fee can also be applied to insurance or used to build up a cash reserve to keep the community functioning.

Each condo is different, but a few common examples include:

High-rise and midrise apartments with common interior hallways
Garden-style buildings with outside entrances
Multistory townhomes, which can share common walls or be detached structures not sharing common walls.

You may be able to deduct your mortgage interest if you itemize deductions on your tax return. And you may discover that, like detached homes, condos may appreciate in value over time. Please consult your tax advisor about your individual situation.

General costs that you can expect on your mortgage payment include:

Monthly mortgage payment
Local property taxes (in most areas)
Insurance costs, which are typically less expensive than policies for a single-family home
Homeowners association (HOA) fees

Considerations and key questions to ask your homebuying team

Remember, you’re not just buying a home — you’re buying into a community. Your lender, condo association, and real estate agent can be great resources for questions.

Read the Condo Buyers Guide to learn about all of the considerations.

Considerations for a condo

Condo properties may come with more risk because the condo association’s decisions can impact property values. To make sure your condo qualifies for the most favorable mortgage, your lender will evaluate:

The physical condition of the community (inside and common areas)
How financially stable the community is
If the community has any outstanding debts related to structural integrity, and if residents are in a safe building (or unit-dwelling)
If the community has any evacuation orders
That there are no major lawsuits pending against the condo association or developer that could limit your ability to obtain financing
That all mandatory property inspections have been performed with no pending actions to resolve

Ask your lender

Has your team conducted a review of the condo? Does its safety or governance bring up any concerns?
How much can I afford to spend on a condo?
Are there any additional costs associated with purchasing the condo?
Is the condo warrantable, meaning it meets guidelines set by Fannie Mae and Freddie Mac?

Homebuyer tip: As part of a broader review of your property, your lender will try to uncover issues that may impact safety, soundness, structural integrity, or habitability. This is for the security of your home and the lender's investment.

Ask the condo association

Are there any special assessments (such as for capital improvements to the condo property) that will affect your cost to own the condo unit or the building’s value in the long term?
What are my legal rights and obligations under the condo bylaws?
How are officers elected to the condo board or HOA?
What kinds of modifications to the unit are allowed?
How much is in the cash reserve fund for future repairs?

Homebuyer tip: You will typically have a limited amount of time to review the condo documents once your offer is accepted by the seller. One of the most important steps to buying a condo at this point is to talk to your real estate professional and to know your rights — and, if necessary, consult a real estate attorney.

Ask your real estate agent

What is included in the HOA or condominium fee?
Is a parking spot included with the purchase of the home or assigned?
Can I talk to some owners in the community or building?
What is the remaining useful life of the community or building’s major components?
Does the master property insurance policy cover full replacement costs?
Does the master insurance policy cover the interior of the units as well as “common elements” used by all the residents?
Is the complex renter friendly?