Pull up any set of home listings, and you might feel overwhelmed by your options. One single-family home may be within your price range, but you might love the amenities at a nearby condo building, or you’re thinking about starting from scratch with a new construction home.
Different types of properties suit homebuyers with different lifestyles and picking the right one can be as important as choosing the right location.
Single-family home
Best if: You want to prioritize privacy and customize your home
A single-family home is a stand-alone property, so it doesn’t share common walls, a roof, doors, or land with another unit. It’s built specifically for one family or person.
Some single-family homes are located within a homeowners association (HOA), but as the owner, you’re still usually responsible for the home’s upkeep.
Pros
- Privacy: A single-family home is built on its own piece of land, which gives you some distance from neighbors.
- Ability to customize: Single-family homeowners have the freedom to make changes to the home itself and the surrounding land (as long as the changes follow local zoning laws and any HOA rules).
- Extra storage space: These homes usually have extra space such as an attic, basement, and spare closets.
Cons
- Higher price: Single-family homes are usually more expensive than other types of dwellings. This increases your mortgage payment along with other costs of homeownership, such as your down payment, property taxes, and homeowners insurance.
- Potentially high maintenance costs: Owners will need to maintain the home and the surrounding land, which could also drive up the overall costs of homeownership.
- No shared amenities: Single-family homes usually lack community amenities, such as a pool and gym.
How to pay for it
Most mortgage programs — including conventional loans and government-backed mortgages like FHA loans — can help you buy a single-family home.
Shopping around for a mortgage can be stressful. Fortunately, Credible simplifies this process and makes comparing multiple lenders easy.
Learn More: How to Buy a House: Step-by-Step Guide
Multi-family home
Best if: You’re looking for an investment property
A multi-family home is a single building that has several separate residences. Examples of this include a duplex or small apartment building. Each unit has its own kitchen and bathroom, but the residents typically share walls, a roof, laundry space, and the surrounding yard.
Pros
- Rental income: These buildings are typically owned by one person who lives in one unit and rents out the others. If you own the building, the rental income can offset the cost of your mortgage.
- Ideal for multigenerational families: This is a great option if you want to live near family members but still retain privacy.
Cons
- Less privacy compared to single-family homes: Because you’re sharing walls, a roof, and a yard, you may hear your neighbors and run into them more often.
- Potential for vacancies: Owning the building comes with perks, but any temporary vacancies will cost you money. You’ll need to make sure you have emergency savings for this possibility.
How to pay for it
If the multi-family home has up to four units, it’s considered residential for the purpose of financing. That means you can buy the property using the same type of mortgage as you would for a single-family home, including conventional and government-backed loans.
New construction home
Best if: You want to customize a brand-new dwelling
A new construction home is just what it sounds like: a brand-new home with the most up-to-date building standards. You can either purchase your own land and contract with a builder to customize your abode, or you can select a move-in-ready home designed by the homebuilder.
Pros
- Control over the process: Depending on what your builder offers, you might be able to customize everything from the size of the home, where it’s located, how it’s laid out, and all of the building materials.
- No bidding wars: You won’t have to worry about submitting an offer and competing with other homebuyers, which is especially useful in a market with limited inventory.
- New materials: Newer homes are usually more energy-efficient and built to meet current building codes. And because everything is brand-new, you won’t need to worry about making too many repairs or replacements like you would on a fixer-upper.
Cons
- Waiting period: It takes nearly seven months on average to build a one-unit home, so you’ll need to find a place to live in the meantime and potentially field questions from the builder throughout this period.
- Unexpected costs: It’s a good idea to budget for unexpected costs and price increases that might drive up your ultimate home purchase price.
- No negotiating: The builder you work with might offer set prices, leaving you less room to negotiate costs.
How to pay for it
There are two ways to finance the purchase of a new construction home:
- Use a construction loan to finance the building of the home.
- Take out a traditional home loan to buy a new construction home.
Check Out: How to Get a Mortgage
Condo
Best if: You want to use shared services and amenities and don’t want to deal with home maintenance
A condo, or condominium, is a single unit within a multi-unit building or property. Residents often share amenities such as a laundry room, pool, dog-walking area, and fitness center.
A condo association collects monthly fees from the residents and uses the money to maintain the property and shared areas.
Pros
- Affordability: Condos are generally cheaper than buying a single-family home.
- Shared amenities: Some condo associations offer amenities and social opportunities to meet neighbors.
- Security: Condo associations may also hire security guards to patrol the grounds, which may make the neighborhood safer.
Cons
- HOA fees: While the cost of the condo unit could be more affordable than a single-family home, you’ll typically need to pay monthly condo fees that range from a couple hundred dollars to more than a thousand dollars per month.
- Restrictions: Condo associations usually set rules that members have to follow.
- Potentially harder to sell: Because condo living isn’t a good fit for everyone, you may have a more limited pool of prospective buyers should you sell your property.
Check out: Are Condos a Good Investment? Figuring Out the Pros and Cons
How to pay for it
You can use conventional loans, FHA condo loans, and VA condo loans to purchase a condo. But it might be harder to qualify, relative to a single-family home, because the mortgage lender will scrutinize the health of the condo project itself in addition to your own finances.
The details vary with each mortgage program, so ask a lender to walk you through your options.
Townhouse
Best if: You want the amenities of a condo but also prefer to own the land where the townhouse is built
A townhouse is a unit within a multi-unit property. These are usually composed of several floors and may include a garage and a small yard.
Residents often share walls and a roof, and there also may be shared common areas like pools, dog-walking areas, and fitness centers. You’ll pay a monthly fee to the homeowners association to cover the maintenance.
Pros
- Amenities: Townhouse residents may have access to amenities such as pools, gyms, and dog-walking areas.
- Land ownership: If the townhouse comes with a yard, you’ll own the land. Even better, the HOA might include landscaping and pest control.
Cons
- Less privacy: Because you’re sharing walls and backyard space with other neighbors, there’s inherently less privacy compared to a single-family home.
- Restrictions: Townhouse residents typically must follow the rules set forth by the HOA. For instance, you might need to get permission to do major renovations and follow guidelines about decorating the exterior, and you might not be able to own certain pets.
How to pay for it
You can use a conventional loan or government-backed mortgage to buy a townhouse, but the lender may need to evaluate the financial health of the homeowners association.
Co-op
Best if: You’re buying in a large city
When you buy a co-op, you’re not actually buying a piece of property. Instead, you become a shareholder in a corporation that owns a multi-unit building. The shares entitle you to lease one of the units.
Co-ops are popular in urban areas, such as Washington, D.C., and New York City, and require a monthly maintenance fee for upkeep.
Pros
- More options: In some large cities, co-ops provide an alternative to condos and townhomes that might be more affordable.
- Participation: Because you’re a shareholder in a corporation, you'll get a say in how the building or complex is run, even if you're not on the board.
Cons
- Tough approval process: You’ll need to sit through an interview where the co-op board asks about your job, hobbies, lifestyle, and plans for renovations. When you later sell your co-op shares, you might have trouble finding a suitable buyer who also passes the test.
- Rules and regulations: You’ll have to abide by the co-op’s rules, which might limit everything from your ability to remodel your unit to your plans for renting out your property.
How to pay for it
You won’t use a traditional mortgage loan to buy a co-op since you don’t actually own your unit. Instead, you’ll need to find a bank or other lending institution that offers “co-op loans” or “share loans,” which allow you to purchase shares in the cooperative.
The lender will typically want to check the financial health of the co-op and see how it operates.
Questions to ask yourself when choosing a home
Every type of home comes with its own pros and cons. To figure out which one is right for you, ask yourself these questions:
1. How much space do I need?
If you need lots of room to accommodate a growing family (or a dog), consider a single-family home or townhouse.
These tend to offer the most space because you’ll have a yard and garage. But it’s always a good idea to compare square footage; it’s always possible one condo offers more space than a nearby single-family house.
2. Do I want the freedom to renovate?
If your single-family home is situated within a homeowners association, you might need to follow a few rules about exterior maintenance.
But generally, you have much more flexibility to personalize a single-family house compared to other types of dwellings. Homeowners association rules for condos, co-ops, and townhouses tend to be much stricter.
3. Am I willing to pay additional fees?
Residents who live in co-ops, condos, and townhouses typically pay a monthly fee that covers services for its residents. These services vary with every HOA, but they might include utilities, landscaping, pest control, pools, gyms, parks, playgrounds, and other amenities.
The monthly fee also varies with each HOA, ranging from a few hundred dollars to more than $1,000.
4. Will I want to refinance in the future?
While you might think you scored a great deal on a mortgage, it’s always a good idea to look for future savings. The process of refinancing a single-family home, condo, or townhouse is pretty straightforward. You’ll apply for a new mortgage, pay off the original loan, and pay down the new loan over time.
Homeowners usually do this when they can save money or if they need to borrow cash.
But you’ll have to go through more steps to refinance if you live under a co-op. You’ll need to find a lender that offers co-op refinance loans, and the co-op board will have to approve your request.
5. How much can I actually afford?
Getting a pre-approval is one way to find out how much you can spend on a home. During this process, a lender will review your credit history, bank statements, and income to figure out how much you can put toward housing expenses per month.
Single-family, new construction, and multi-family homes may cost more than condominiums. However, you’ll need to make sure you can fit any condo association fees into your budget if you decide to buy one of these dwellings.
