• When you buy a condo, you own your unit and share ownership of the common areas and the building’s exterior with the other unit owners. 
  • Homeowners Associations (HOAs) charge monthly fees for ongoing common area maintenance and set rules to help the community function more smoothly.  
  • It can be more difficult to get financing to buy a condo than a single-family home because lenders must review the building’s condition and the HOA’s financial position to confirm that the community is well-managed. 

Condos may offer a more affordable path to homeownership than stand-alone single-family homes. They can also offer communal amenities, such as pools, fitness centers, rooftop decks, and clubhouse facilities. However, buying a condo requires additional considerations, including a review of the HOA that regulates and maintains the community. 

This article will explain how buying a condo works, including how it differs from buying a detached home, how condo purchases can be financed, and what to watch for when buying a condo. 

How Does Buying a Condo Work?

Condos (short for condominiums) are a property type in which you own the interior of your unit while sharing ownership of common areas, including outdoor spaces, community amenities, and often the roofing and exterior walls of the structure. The owners maintain units, while common areas are maintained by the HOA, which charges regular HOA fees to finance this maintenance. HOA fees can range from a few hundred to a few thousand dollars per month, so it’s important to review these fees when shopping for condos.[1]

Buying a Condo: A Step-by-Step Overview

The process of buying a condo is similar to buying a home, but the shared ownership of common areas can add some complexity and special considerations. Here is an overview of the condo-buying process:

  1. Get pre-approved for a mortgage. If you’ll be using financing for your purchase, mortgage pre-approval can assess your likelihood of qualifying for a home loan and tell you how much a lender is willing to loan you based on your financial profile.*
  2. Shop for your new condo. You can browse listings online, but you may also want to hire a real estate agent to represent you. In addition to providing insights about the market, showing you properties, and representing your interest in negotiations, buyer’s agents can help you find suitable condo units. Agents typically charge a percentage of the purchase price at closing. However, you may be able to negotiate to have the seller help you cover this expense.
  3. Make an offer. Once you find a property that works for you, you (or your agent or attorney) can draft a purchase offer to the seller, outlining your proposed purchase price and terms. If the seller accepts your offer, you can move forward, providing an earnest money deposit to maintain a financial stake in the deal while the transaction details are finalized. 
  4. Secure financing and complete your due diligence. With the property under contract, you can submit your mortgage application to give your lender time to thoroughly review your finances and the property before funding the loan. At the same time, you can arrange the home inspection to assess the physical condition of the property, the appraisal to confirm the property's value, and the title search to confirm that the owner has the clear right to sell. You should also review the HOA’s covenants, conditions, and restrictions (CC&Rs) to confirm that you’re comfortable living in the community under their rules.
  5. Close the deal. Once your down payment and closing costs are wired as instructed and the documents are signed by all parties, you can collect your keys and take possession of your new condo.               

Things To Know Before Buying a Condo

Before shopping for condos, make sure you understand these key concepts about condo ownership:

  • You own the unit privately but only have a shared ownership stake in the land. The condo's interior is yours, but common areas (hallways, landscaping, and amenities) are jointly owned with the other unit owners.
  • Owners pay monthly HOA fees. HOA fees vary widely by community, so you may want to find out how much HOA fees are before even considering a specific condo. Failure to pay your HOA fees can result in late fees, loss of access to amenities, lawsuits, and (in extreme cases) foreclosure.[2]
  • Owners can be charged special assessments. If the HOA doesn’t have enough reserves for big repairs, it can hit owners with large, one-time fees.[3]
  • Financing can be more complex. While many condos qualify for common mortgage loan types, including conventional loans, FHA loans, and VA loans, not all condos qualify. Buildings that have pending litigation issues, are struggling financially, or are not on approved lists might require higher down payments or might not qualify for traditional financing at all.[4]
  • HOA rules can affect your lifestyle. CC&Rs may regulate pets, noise, renovations, parking, maintenance, and even outdoor decor.[3]
  • Resale value partly depends on the HOA. A well-managed community in which many of the units are occupied by the owners usually holds value better.
  • Privacy may be more limited. You’ll likely share walls, hallways, and amenities with neighbors.
  • Insurance requirements are different. Rather than a traditional homeowners insurance policy, you’ll likely need an HO-6 condo insurance policy for the interior. The HOA carries a master policy for the structure, passing the cost of the policy to owners via HOA fees.[5]
  • Some condos limit rentals. If you plan to rent out your unit, now or in the future, check the CC&Rs to see if there are any restrictions against renting.

Pros and Cons of Buying a Condo

There are several benefits of buying a condo, including:

  • Affordability, compared to single-family homes in the same area[6]
  • Less maintenance since the HOA handles the exterior care 
  • Access to amenities 
  • Community living may be a good fit for owners who like to socialize
  • Rental income potential if you decide to rent out your unit
  • HOA rules can keep the community orderly

There are also a few potential downsides to condo ownership, including:

  • HOA costs, rules, and restrictions (although single-family homes in HOA neighborhoods are subject to fees, rules, and restrictions as well) 
  • Less privacy than with stand-alone homes
  • If the condo building faces financial or legal challenges or doesn't qualify for traditional mortgage loan types, it can be more difficult to secure a home loan. 

The Bottom Line

Condos can be a good housing option for homebuyers seeking low-maintenance properties, which may also be more affordable than stand-alone homes. 

When considering condo ownership, remember that the community's management is as important as the unit itself. Paying close attention to HOA fees, the condition of common areas, and CC&Rs can help you choose the right condo.