New American Funding Blog

Purchasing a Condo: Part 1

By Courtney Lynch   |  July 14, 2015

Buying a condo requires you to understand the purchasing process. Renting an apartment continues to become less affordable making purchasing a home more appealing to many individuals. If you aren't quite ready for a detached home in the suburbs, a condo might be the perfect solution.

In some instances, your mortgage payments can be even less than the money you spend each month in rent. And the bonus is you're actually building equity.

If you're considering investing in a condo of your own, there are a few things you should think about and make sure are completed before making the big move to a new home.

Follow these tips and guidelines to assist you while navigating through the process:

Save for your down payment

When you decide to invest in a condo, one of the first things you will need to do is save enough money for a down payment. Typically, the historical rule of thumb has been to contribute 20 percent of the purchase price toward ownership of the home. However, government-sponsored enterprises, such as Freddie Mac and Fannie Mae, allow qualified first-time buyers to acquire a new home with as little as 3 percent down. 

If you want to qualify for a lower down payment loan, you will likely need to also pay private mortgage insurance and may have a higher interest rate. For this reason it is crucial that you save a substantial sum to build equity in your home right away. According to My First Condo, it will also be easier to qualify for a loan if you can provide more money up front.  

When saving for a down payment automatically deposit money into a savings account from your payroll. You will be less tempted to spend the money and reach your goal faster if deposits are all automatic. 

In addition, consider tightening your belt and cutting out extra expenses. Put off spending money on new clothes, vacations and other frivolous items. If necessary, consider taking on a few more hours at your current job or even hunting for an additional one to help build your savings account. 

Another option that may be available is asking your family for help. When birthdays or other gift-giving celebrations roll around, request money to put toward a down payment. Your loved ones may be able to help you out a great deal during your quest to purchase your first condo.  

Check if grants are available in your state

According to federal homebuyer grants may be available to you. Typically these are available to first-time buyers and usually cover less than 10 percent of the homes value. These grants can help you cover closing costs and provide you with better access to homeownership.  

This is a great way to help you save money when looking to purchase a condo. Reach out to a real estate professional and ask about programs and grants available in your state to ensure you are able to take advantage of any opportunities. 

Reach out to a real estate agent 

Hiring a quality real estate agent will help you substantially as you set out to become the owner of a beautiful new condo. Find someone who is familiar with the neighborhood you are interested in and has substantial experience with the buyers market.

Ask family members and friends if they have any recommendations. Also, make sure to ask any real estate professionals you decide to speak with for contact information of clients they have served in the past with similar desires as you. Consider reaching out and speaking to them to ask about their experiences with the particular agent they worked with and whether they would recommend his or her services. 

Know your neighborhood

Working with your agent can help you develop a better understanding of the local real estate market in the area you want to purchase a condo. Ask about the average listing price, selling price and time on the market. This can give you a better idea of the local housing conditions and whether you will be looking for a new condo in a buyer's or seller's market. Knowing this information can help you a great deal when negotiating an offer with the seller.

In addition to knowing the local real estate market, it is beneficial to get a clear idea of what is available in the neighborhood. Head out to local eateries, bars and parks to get a feel for the area. You want to ensure the neighborhood you are interested in does indeed fit your wants and needs. Reach out to individuals living in the neighborhood and ask about their opinion of the area as well.

If public transportation is available nearby, use it a few times and get a feel for how it works. You want to ensure you feel comfortable living and operating in the neighborhood where you have decided to purchase a condo.
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