How to Save On Your Condo Purchase

Posted October 25, 2022 by in Lifestyle

You want a house. Easy to rent, easier to maintain, and comes with amenities. So, a condo purchase is a perfect decision for you, right? 

Home prices have skyrocketed in 2020-2021. In Idaho, prices have seen a 27.8% increase. Average condo prices have gone up by only 14.6% in the same year.

But with 726,000 units ready for sale, and a 1.7% increase in condo ownership from 2019, the market is oversaturated. So, the reality might be harsher than you think.

The Reality Of Condo Purchase

As you’ve probably heard, purchasing a condo has quite a few benefits. I’ve listed some benefits that you’ll find in every condo.

  • Lower price. According to NAR (2021 Q3), the average price of a condo was $300,000, and a house was $367,000.
  • Amenities. Condos can include shared gyms, swimming pools, game rooms, and more.
  • No maintenance. A HomeOwners Association will take care of cleaning and upkeep.
  • Appreciation value. Condos are always appreciated positively. Between 2012 and 2017, the value proposition of houses had an unstable 27.9% increase, while condos gained a 38.4% stable increase.
  • Security. Condos are part of a complex with hired security.
  • Rent. A 2-bedroom condo can earn you $2,054 per month. 

Unfortunately, many ignore the downsides of a condo. But I’ve stated the major ones here.

  • A wrong location can tank rent. Not being close to tourist spots or the city can lower rent by 50%.
  • Inconsistent HOA fees. HOA can charge you from $200-$1500 without prior notice.
  • Lack of privacy. You’re a few steps shy of full communal living. Expect gossip and judgment.
  • Difficult to sell or rent. Of 141.95 million condos, 83.48 million live in their condos, many unable to sell or rent. It’s an oversaturated market.
  • Rules. The HOA rules and regulations will control your lifestyle heavily.

Condo prices and numbers will only increase and may be out of your reach soon.

So, Is There A Way To Save on My Condo Purchase?

Here are some things you should consider for finding a prospective condo.

  • Close to tourist locations, transit, and the city.
  • Consistent history of price and value increase.
  • Complex maintenance, security, owners, and amenities 
  • Consistent, accountable HOA fees and simple rules.

To finance your condo purchase, try following these suggestions.

  • Aim for higher-value condos to get better rent.
  • Don’t pay with equity. This will lower your ROI.
  • Keep and showcase proof of income and employment, forecasted expenses, debts, tax information, and bank statements for a pre-approval loan.
  • Try to showcase any positive financial advantage you have during underwriting. Provide clear, healthy accounts to create room for negotiation.
  • Eliminate the down payment or lower it to 5%-10%. Talk to the owner or contact local banks.
  • With a credit score of 664-716 or higher, go for PMI. You’ll get lower rates than FHA mortgage insurance.
  • Lengthy loan terms incur more interest. So don’t agree to cheap but long deals. HUD suggests paying 29% of gross income.
  • You can pay HOA fees and mortgage with rent money.  

What If I Have A Lower Credit Score?

You can take an FHA loan if your credit score is low or you have financial troubles. FHA loans allow low rates and less than 5% as a down payment, but you have to watch out for mortgage insurance. The cost can sneak up on you if you’re not careful.

But condos aren’t counted as single-family homes by the FHA. A condo has to be in the U.S Department of Housing and Urban Development’s (HUD) List of Approved Condo Properties to qualify for the loan. A complex where 90% of the condos have already been sold also qualifies.

Can You Recommend Anything?

I would suggest looking for condos in Nashville. Condo prices there have gone up by only 13.9%, much less than in other states. You might be concerned about transit and tourist spots, but a condo in Brentwood can counter these issues.

Brentwood retains nature, calm, and coziness but with the advantages of a city. You get to walk on relatively empty streets, but transit is always available. Getting to all popular tourist spots is easy, and the neighborhood is ideal for living. It’s also very friendly for electronic car owners, sporting many charging stations all across.

If you’re interested in checking out condos in Brentwood, have a look at this listings.

Two women looking at a laptop together

Getting a Condo in 2022 is like playing with fire. Thankfully, even if the market collapses, condos remain cheaper to rent for vacationing and living. So, aim for condos that are appreciated as high value and payback for it with the rent. If you want to live in one, then aim for one that’s been foreclosed recently, which will lower the chances of a down payment and lower the cost.