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If you're looking to buy a home this year, you may be in for a challenge. We're starting off 2022 with home prices sitting at elevated levels. That's due in part to the fact that supply is quite limited.
Making matters a little more complicated, mortgage rates have been higher in 2022 than they were in 2021. While last year's rates may have been low enough to help offset higher home prices, that's not necessarily the case right now.
If you're looking to buy a home -- particularly a starter home -- you may be considering a condo purchase. When you buy a condo, you own a specific unit within a larger building. Condos are commonly smaller than standalone homes, but they also tend to be less expensive. That's why they could be a good option in today's housing market.
But if you're going to buy a condo, you'll need to be aware of the pitfalls you might encounter. Here are three to keep on your radar.
1. Rising HOA fees
When you purchase a condo, you're required to join the homeowners association (HOA) that governs it. That means you're required to abide by your HOA's rules and also pay your HOA a monthly fee that can change over time. The purpose of that fee is to cover common area maintenance -- things like lawn care and snow removal. But if your HOA votes to increase that fee, you'll be stuck with a higher payment to factor into your budget.
2. Repairs to your unit
The upside of owning a condo is not having to deal with major repairs like replacing a roof or foundation. But that doesn't mean you won't run into issues with your own unit. If an appliance breaks, it'll be on you to replace it. And if damage occurs within your unit, you'll need to foot the bill for it, as that's generally not something your HOA will cover.
3. Trouble selling
Right now, there's a lot of demand for starter homes -- namely, because home prices are so high and there's limited inventory at the lower end of the market. But once home prices come down and housing supply increases, a condo may be a more difficult sell. That's because condos don't tend to be very large and they're not always suitable for families with children or pets. If you pay up for a condo this year, you may end up having to accept a lower price for it if you sell in three, four, or five years.
Should you buy a condo in 2022?
If you can't afford most homes on the market today, a condo may be a good compromise for you. But just be aware of the issues you might encounter (both in the near term and down the line) if you buy a condo this year. You may decide you'd rather sit back and wait for more standalone starter homes to hit the market rather than limit yourself to a single unit that may not serve your needs over time.
A historic opportunity to potentially save thousands on your mortgage
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!).
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