Buying a condo is a big step and as with any home purchase, there are a few hidden fees that may take some buyers by surprise. Here are some costs that you may encounter and should include in your home buying budget.
Getting a loan for a condo can be slightly different from getting one for a stand-alone home. While getting a mortgage without a down payment is sometimes possible, as a potential condo buyer you should expect that you will probably need a sizeable down payment of 10-20%.
Even if the condo homeowner's association has insurance, owners of individual units will need to have private homeowner's insurance as well. Ask to see what is covered by the HOA to calculate approximately how much insurance you need and what this insurance will cost. The first payment will be made around the time that ownership papers are signed, so this expense needs to be in the initial condo buying budget.
These fees, and even who pays for them, will vary from case to case. They include attorney's fees, title insurance, and other costs. In some cases, the sellers pay; in other cases, the buyers do. These can cost as much as 5% of the cost of the condo, so be sure you know upfront who is responsible for paying.
If you use a loan to pay for your condo, you can expect a few fees associated with this mortgage. There is usually an application fee, an appraisal fee, a mortgage tax, and other small fees. Together these can cost $2000-$3000, which is a considerable amount of money. These fees take many home buyers by surprise, no matter what type of property they are buying.
Condo Association Fees
These are also called maintenance fees and cover the cost of maintaining the building and the premises. The cost of maintaining the property as well as its amenities are split between owners, usually according to the size of each owner's condo. In addition, the homeowners' association will often keep a reserve fund to cover any unforeseen expenses such as weather damage. These fees will be paid as long as you own the condo, and may change according to the needs of the property.
Just as with a single family home, a condo needs an appraisal done before you can be approved for a mortgage. The lending company must have this to verify what the current value of that property is, and to make sure they aren't lending more than they should be. Without an appraisal, you won't get approval.
These deposits, which are usually a few hundred dollars, cover damage to the building that is incurred with moving in: wear and tear on floors of common areas, etc. Some condo associations do not charge these fees, but most do.
Buying any kind of home is expensive and can include a number of hidden costs. However, if you plan for these costs and budget for them, they will not be a challenge or a barrier to owning the condo of your dreams.
Photo credits: shutterstock.comPosted by Terry Paranych on