If you are the type that wants to choose your condo’s location in the building and you like to be the ‘first owner’ of a unit, buying a pre-construction condo may be something that you want. While it certainly has its benefits, there are some things you should know before you jump in headfirst.
Looking for Current Mortgage Interest Rates? Click Here.
You Need Time
Buying a pre-construction condo could mean buying the condo before they’ve even started building. Unlike buying a home, the builders need to build sometimes hundreds of units before you can move into it. If you are in any type of hurry, a pre-construction condo isn’t the way for you to go.
You Need a Big Deposit
Unlike when you buy an existing condo, you need to be prepared to put at least 20% down on the condo. The condo builder/developer will let you know how much money they require down in order to secure the unit. When you buy a pre-owned condo, you can put down the minimum that the loan program requires, which can be as low as 3.5%, but this isn’t the case for pre-construction condos.
You Should Interview the Developer
The condo development’s sales office is trying to make a sale. You need to do your own due diligence to find out about the developer. You are free to ask them as many questions as you like. We suggest at least asking the following:
- Does the builder have experience building condos?
- Do they usually get the condos done on time?
- Has the builder ever had to stop mid-project because they ran out of money?
These are questions you’ll want answers to as they can help you make the most of your decision. You want to steer clear of builders that don’t have any experience or have bad experience in building/completing condo projects.
Click to See the Latest Mortgage Rates.
You Should Know What the Area Will be Like in the Future
If the area around the condo development isn’t developed yet, find out the city’s plans for the area. If they already have plans, you can see if they fit in with what you want to live near. For example, if they are building factories there, you may want to consider a different condo building. If they are building shopping centers, though, it could be something that you want to be near. If the city doesn’t have plans yet, at least find out what the area is zoned for so that you can be best prepared for what lies ahead.
You Should Use a Realtor
Many people don’t think about using a licensed realtor when they buy a pre-construction condo, but you may want to think about it. A realtor knows the right questions to ask and has inside information on the area as well. A realtor can help you choose the right building and even choose the right layout. If this is your first pre-construction condo purchase, a realtor can be of great help.
You May Have a Tough Time Getting Financing
The final issue, and it’s a big one is the problems you may have with financing. Lenders want to know that you are buying a profitable property, rather than one that may fall apart at the seams. Because you aren’t buying a single-family home, the lender has to worry about all of the other buyers too.
You won’t be able to get financing until the project is complete and a specific percentage of the units are sold. If there are too many units sold to one owner or too many owners will use the units as investment properties, you won’t be able to find traditional financing.
Buying a pre-construction condo can be exciting and hard at the same time. Make sure you know what you are getting into and what your lender requires of the units before you can get financing. The process is a slow one, but it could be one that gives you great value when it is complete.
Click Here to Get Matched With a Lender.