What Should I Know Before Buying a Condo?

Crystal 

Walker

Content Writer

A condo can be the fastest path into homeownership in an expensive market. It also comes with risks a single-family home doesn't have, and most of them live inside paperwork buyers rarely read before making an offer: the HOA budget, the reserve study, and the building's financing history.

Buying a condo means owning your unit outright while sharing ownership of the building's common areas through a homeowners association. Before making an offer, check the HOA's fees, its reserve fund health, its special assessment history, and whether the building currently qualifies for a conventional mortgage. An underfunded HOA can block financing entirely, even if your own credit is strong.

What Exactly Are You Buying With a Condo?

A condo purchase splits ownership into two pieces. You own the interior of your unit outright, the same way you'd own a house. The roof, lobby, elevators, parking structure, and grounds belong to every owner collectively, managed through the HOA board. Nearly everything else on this list traces back to that split, because your costs, your rules, and a good chunk of your risk are now tied to decisions made by people you didn't elect and can't fully control.

Condos made up roughly 14 percent of recent home purchases nationally, with townhomes and row homes at 11 percent, according to the National Association of Realtors' 2025 Profile of Home Buyers and Sellers. That's a real share of the market, but smaller than a lot of first-time buyers assume given how often condos get pitched as the obvious affordable entry point.

What Does a Condo Actually Cost Each Month?

The mortgage payment is only part of the number. A realistic condo budget stacks several costs on top of principal and interest, and skipping even one of them is how buyers end up house-poor within a year of closing.

The Monthly Cost Breakdown

Here's what actually shows up in a condo owner's monthly budget:

• Principal and interest on the mortgage

• Property taxes and homeowners insurance on your unit

• The monthly HOA fee, which covers building maintenance, staff, insurance, and amenities

• A portion of the building's master insurance policy, which may carry a deductible you're responsible for

• Contributions toward the HOA's reserve fund for future capital repairs

Why a Low HOA Fee Can Be a Red Flag

That last item is where buyers get caught off guard. What you're paying into reserves today may not cover what the building needs in five or ten years. Sometimes a low HOA fee means a well-run association. More often, it means a board that's put off saving for a roof replacement or an elevator overhaul, and that bill doesn't disappear just because nobody budgeted for it.

What Are Special Assessments, and Why Do They Catch Buyers Off Guard?

A special assessment is a one-time bill an HOA charges owners when the reserve fund can't cover a major expense: a new roof, storm damage, structural repairs, a failed inspection. These aren't optional. Assessments tied to major structural or roofing work can run from a few thousand dollars to well into the tens of thousands per unit, depending on the scope of the repair and how underfunded the reserve was to begin with.

Regulators have taken notice. Some mortgage industry analysts describe the current wave of condo lending reform as the biggest shift in underwriting standards since Fannie Mae and Freddie Mac began tightening reserve requirements after the Champlain Towers South collapse in 2021. If a building has older infrastructure or a suspiciously low HOA fee, ask point blank whether a special assessment is being discussed. Board meeting minutes usually mention it before it's official.

Can You Even Get a Mortgage on This Condo?

Most buyers never think to ask. Before a lender approves a conventional loan on a condo, the building itself has to pass a review, separate from anything about your own finances, and Fannie Mae and Freddie Mac tightened those rules considerably this year.

What Changed in 2026

Per Fannie Mae Lender Letter LL-2026-03, the Limited Review process is retired for condo loan applications dated on or after August 3, 2026. The waiver of project review still applies to smaller buildings of ten units or fewer, but established buildings above that size no longer have a shortcut. In practice, that means a full financial review of the HOA before any unit in the building can close. The minimum reserve allocation is also rising, from 10 percent to 15 percent of the HOA's annual budgeted income, for applications dated on or after January 4, 2027. And master insurance policies with a per-unit deductible above $50,000 no longer meet Fannie Mae's insurance requirements for loans with application dates on or after July 1, 2026.

What This Means If You're Making an Offer

A building with thin reserves or a high insurance deductible can become non-warrantable. That single word can sink a deal, because it means no unit in the building qualifies for a conventional loan, regardless of how strong the buyer's own credit and down payment are. Mortgage industry analysts have pointed to older buildings that historically budgeted closer to 5 to 8 percent for reserves, well under the new 15 percent floor, as the most likely to fail the updated threshold. Confirm a building's warrantability status before writing an offer. Finding out during underwriting is too late.

What Should You Check Before Making an Offer?

Request these documents from the seller or HOA before your due diligence period closes.

Documents to Request

1. Reserve study. Confirm one exists, was completed within the last three years, and by an independent professional rather than the board itself.

2. HOA budget. Check what percentage goes to reserves. Anything below 15 percent is now a financing red flag.

3. Board meeting minutes. Look for pending litigation, deferred repairs, or assessment discussions from the last two years.

4. Delinquency rate. Ask what share of owners are behind on HOA dues. High delinquency strains the association's ability to fund reserves.

5. Master insurance policy. Confirm the deductible amount and whether you'd need a personal HO-6 policy to cover the gap.

6. Owner-occupancy ratio. Buildings with a lot of investor-owned units face different financing rules than owner-occupied ones.

Who Tends to Do Well in a Condo?

Picture a buyer relocating for work with six weeks to close before a new job starts. A single-family home means yard work, a roof to worry about, and exterior maintenance with zero time to learn any of it. A well-run condo building with healthy reserves and low delinquency hands all of that to the HOA. In exchange, the owner gives up a bit of control over how the property looks from the outside.

Buyers who travel often, care more about location than square footage, or are downsizing from a bigger home tend to like that trade. It's a tougher fit for anyone who wants to renovate freely, or who finds shared walls and shared decision-making genuinely hard to live with.

Condo vs. Single-Family Home: What Actually Changes?

The core trade is control versus convenience. Lower maintenance and a lower entry price come at the cost of some autonomy over your home's exterior and a vote you don't fully control on decisions that hit your monthly bill. For the full comparison across every property type, our guide on how to choose between a condo, townhouse, single-family home, or new construction covers that ground. This article picks up from there, for buyers who've already leaned toward a condo and want to know what to check before committing.

What Most Buyers Misunderstand About Condo Ownership

A low HOA fee looks like good news. Often it's the opposite: underfunded reserves quietly building toward a special assessment. There's also a widespread assumption that any condo qualifies for a standard mortgage. It doesn't. A building's own financials can disqualify every unit inside it, no matter how strong the buyer's credit score is. And plenty of buyers write off the HOA fee as money spent, without ever comparing it to what exterior maintenance would actually cost on a single-family home in the same neighborhood.

Condo ownership isn't the problem here. Skipping due diligence at the building level is. Reviewing the red flags to watch for while house hunting and understanding why lender approval doesn't always mean a purchase is affordable will help you steer clear of the two mistakes that trip up condo buyers most: underestimating total monthly cost and never checking the building's financial and structural health.

Ready to start touring? Find a local buyer's agent through PrimeStreet who knows how to read an HOA's financials before you fall in love with a unit.

_{Disclaimer: This article is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Always consult a licensed professional before making decisions based on this information.}