Buying your first condo is exciting, but you may not know where to begin. Here are six helpful steps to get you started.
Step 1: Prepare your finances
The first step on your condo-buying journey is to calculate how much you can realistically afford to spend. It’s a good idea to keep your total housing payments – mortgage, condo association fees, property taxes and insurance – under 30 percent of your gross monthly income.1 Now is also a good time to gather the documents you will need for your mortgage application, like your bank statements, pay stubs and copies of your tax returns.
Step 2: Put money aside for a down payment
At the same time, you should also begin saving for a down payment. Many people put 20 percent down, but you may be able to put as little as 3 percent down, depending on your home buyer program.2 Once you’ve figured out how much you can afford to spend on a condo, determine the amount of your down payment using a down payment calculator. From there, set aside a portion of each paycheck to start saving.
Step 3: Research your credit report and score
Your credit will be a vital factor in getting approved for a loan. So you should check your credit score for accuracy and look for ways to raise it, if necessary. To keep yourself looking good to lenders, avoid any new credit activity – like opening a new credit card – and pay down your existing balances until you’ve purchased your condo.
Step 4: Decide on a must-have list
Write down all the features you want in a condo and break it down into a short list of “must-haves” and a longer list of “like-to-haves.” If a condo doesn’t have all of your “must-haves,” you shouldn’t consider it.
Step 5: Learn the basics about condo associations
Condo associations are great for maintaining the cleanliness and aesthetic of a building, but they come with regulations and monthly fees. Association fees can vary depending on your property and can include coverage for costs such as the master insurance policy premium, utilities for common areas, maintaining common areas and keeping the association's reserves well funded in case of emergency. When you look at a unit, remember to ask questions about the condo association you’ll need to join. Get a copy of a condo association’s covenants, conditions and restrictions (CC&Rs) from your realtor and review them to make sure you can live with the condo association’s rules before you put in an offer.
Step 6: Find a good home inspector
Before you close on a condo, you’ll need to hire a home inspector to examine the property and report on its condition. However, not all inspectors test for the same things, which can include pests, mold or toxins. To ensure you’re getting a thorough inspection, Nick Gromicko, executive director at the Master Inspector Certification Board, recommends hiring someone who complies with the Home Inspection Standards of Practice or who is a Certified Master Inspector.
Purchasing your first home requires planning and attention, so don’t rush the process. Take your time to find the condo that best fits your lifestyle and your budget.