Buying a Home: Determine Which Kind of Home Suits Your Needs

Once you’ve decided where you want your new home to be located, it’s time to decide which kind of home you want. The three major choices are condos, townhouses and detached houses. Each has its benefits and drawbacks, and each entails a different lifestyle and set of responsibilities.

Condo (or Co-op)

If you don’t like living in an apartment, condo life is probably not for you. You’ll still have shared walls, a shared parking garage and shared common areas. You won’t have complete control over your property, because you’ll be subject to homeowners’ association rules that may affect minute details of your life, such as what kind of Christmas lights you can put up or what kind of doormat you can use. (Before you consider buying a condo, read 9 Things You Need to Know About Homeowners’ Associations.)

Also, buying a condo may not be as good an investment as a house. Because a large number of condos can be quickly built on a small piece of land, it is easy for the number of condos on the market to increase dramatically in a way that doesn’t happen with houses (unless you buy somewhere that still has plenty of open land to develop). And, when it’s time to sell, it can be harder to differentiate your unit from others in your building than it would be to differentiate a house from others in the neighborhood. (To learn about the unique advantages and challenges of this investment, read The Complete Guide to Buying a Condo.)

If you get along well with others, don’t mind apartment life and don’t mind paying homeowners’ association fees every month, a condo might be the right choice for you. The main advantages of living in a condo over a house are that you don’t have to worry about maintaining a yard or the exterior structure. In addition, if you live alone, you may feel an increased sense of security from knowing others are nearby. And if you travel a lot, your house isn't sitting isolated and empty while you are away. Condos also tend to be more affordable than houses, especially for first-time buyers.

Be aware that condo associations can levy special assessments in the thousands of dollars if a common expense comes up that the HOA hasn’t properly planned for, such as an elevator repair or a new roof. When buying a condo, you must investigate the association’s finances. (For more on whether this home option is the right choice for you, read 4 Money Misconceptions About Condominiums and Does Condo Life Suit You?)

Co-operative apartments are a way of setting up apartment ownership that is common in some places, such as New York City. In this structure, you don't buy the actual apartment; you purchase shares in the apartment corporation that give you exclusive use of a particular apartment, including the ability to renovate it just like a condo. Buying into co-ops requires the extra step of having your financial stability vetted by the board of the co-op, a process that generally involves a personal interview. Co-op boards may limit other factors, such as your ability to sublet the apartment or install a washer-dryer. The rules are different enough that we will not describe them in detail in this tutorial. For more information on this type of housing, see Housing Cooperatives: A Unique Type of Home Ownership and Living in New York City: Co-ops vs. Condos.

Townhouse

A townhouse or townhome is a hybrid between a condo and a house. These are often two or three stories, meaning that you don’t have downstairs or upstairs neighbors and therefore may enjoy more privacy and peace and quiet than in a condo (especially if you buy an end unit, which will only have one neighboring unit instead of two). Townhouses also often have attached garages on the ground level, providing greater convenience and privacy than a condo parking garage, and there may be fewer townhouses in a development than there would be units in a condo building.

Like condos, townhouses have homeowners’ associations (and monthly HOA fees) and you won’t have to worry about maintaining the building’s exterior. Townhouses are often priced similarly to equally sized condos. But if you’re looking for something with absolute entry-level pricing, you may not find it in a townhouse because they’re generally larger than condos. Some even have small yards.

The line between townhomes and condos can be fuzzy, though, and what’s called a townhome in one location might be called a condo in another. Don’t rule out a property because of how it's categorized before you see how it’s laid out.

House

Also called a single-family detached property, a house can be the most expensive option in terms of both total purchase price and ongoing maintenance, but it also gives you the most independence and privacy. You won’t have any shared walls, floors or ceilings, and you’ll even have a yard and perhaps a fence to act as a further buffer between you and your neighbors. A yard is also great for children, pets, barbecues, private pools, hot tubs and gardening. Houses are also generally larger than condos, so you’ll probably have more indoor space, too.

But whatever goes wrong with the structure (and things will go wrong from time to time), you’ll have to pay to fix it. You’ll also be responsible for maintaining the yard (or paying someone to maintain it). Houses typically have the best investment value and because a house is all yours, if you outgrow it, you will have the option of adding on, whereas if you have a condo or townhouse, the only way to get a bigger living space is to move. Also, while your monthly mortgage payment might be higher, you won’t necessarily be giving a couple hundred dollars to a homeowners’ association every month (though some neighborhoods, including gated communities, do have pricey HOA fees), so your total monthly cost for a house vs. a condo might be closer than you’d expect.

Size

Regardless of which type of housing you prefer (and can afford), you’ll also have to decide on size. How many bedrooms and bathrooms do you need to live comfortably? Is the amount of space you need now the same amount  you’ll need in the future (e.g., are you planning to have kids, take in an elderly parent or start a home business that will require an office)? Do you want an extra space to rent out to help pay your mortgage? Do you want to use the home as an investment property one day, and if so, what size would be best for that purpose? Can you afford the size of property you want, and if not, can you make do with less or should you keep renting until you can afford something bigger? Do you want the smallest place you can be comfortable in to keep life simple and reduce cleaning, maintenance and possessions?

The bigger the property, the higher the ongoing maintenance costs, utility bills and insurance, and the more you may spend for things like furniture and upgrades. When you have more square feet to cover, replacing the flooring or repainting the house gets more expensive.

Another consideration is that in some locations, one home size or type predominates. If you need a certain size or type of home, you might actually need to decide on that before you decide on your location rather than the other way around. For example, you may want a two-bedroom, one-bathroom house, but there may not be any houses that small in your chosen neighborhood – your smallest option may be a three-bedroom, two-bathroom house.

The Great Outdoors

Finally, consider what kind of outdoor space comes with the property. If it’s a condo or townhouse, does it have any private balconies or decks or a little patch of lawn to call your own? Is there any common green space, a play area for kids, a walking path, a pool or a hot tub? Do you plan to make use of these things, or will your homeowners’ association fees just be wasted on their upkeep? Are you willing to share these facilities with other people or do you want the private ownership and use of them that may only come with a house? Do you have pets and what kind of indoor and/or outdoor space do you need for them? Will the homeowners’ association allow you to have the pets you want? Do you want to be able to entertain outdoors? Do you like doing yard work?

Once you’ve considered in detail which kind of home best suits your needs, you’re ready to calculate how much home you can afford. The next section will teach you how to do that.