With all the different types of homes in the marketplace, it can be hard to decide what is best for you. Whether it’s maintenance, privacy, space or custom-built features, each dwelling type comes with its own set of advantages and drawbacks.
Determining what type of home is best for you requires an understanding of the different housing options, as well as assessing what fits your budget and best meets your needs. Here is a cheat sheet for some of the most popular types of homes out there.
A condominium, or condo, is part of a group of housing units attached to one another in a building, similar to apartments. There are also usually common facilities like recreation and fitness rooms. The building that holds all of the units belongs to an association made up of all the individual owners.
The association determines monthly fees, maintenance and improvement decisions as well as rules and regulations that govern the building. Owning a condo means you are building equity, but you have less maintenance than with house ownership as well as less privacy. While property taxes and mortgage interest are tax-deductible, condo living is best for people who work well in a group. It’s a good idea to compare what you need and want in a home with what a condo offers before making a purchase.
Cooperative apartments, or co-ops, are similar to condos, but almost always less expensive. These apartments are not real property because when you buy into a co-op, you are actually becoming a shareholder in a corporation that owns the building. When you become a shareholder, you have the right to use a housing unit in the property. Co-ops are usually multi-family buildings and are popular in urban areas.
The co-op board, or corporation, has control over all the unit and building decisions, while you pay monthly fees for upkeep. While the board handles maintenance, it can be difficult to enter a co-op or sell due to the board approval process. These homes also typically require a down payment between 20% and 50%.
Townhouses are usually vertical in design and typically have front and back lawns that are individually owned but often are maintained by a homeowners association. These planned unit developments can include common recreation areas like pools and parks and often include attached garages.
This can bring a sense of community and also means that there is less maintenance, but the homeowners association makes decisions about the property. In this instance, you hold legal title to the property and can qualify for a mortgage more easily but resale can be more difficult than for a single-family home.
A single-family home is a detached building that sits on its own lot. This requires the most maintenance on an individual homeowner level, but offers the most privacy and independence.
The value of single-family homes usually appreciate fastest and they tend to be the most sought-after form of dwelling, so they are usually easiest to sell. Some single-family homes that are part of a planned development still have to pay homeowner association fees for landscaping and maintenance of common space.
In addition to comparing the different types of homes out there, it’s important to go back to your budget to see how much home you can afford and what is available in your desired area. The best tool for any financial decision this large is a well-informed mind. You’ll also want to check your credit scores, since these will affect not only the interest rate you’ll pay but the total mortgage amount you qualify for. You can get two of your credit scores for free every month on Credit.com, plus a personalized action plan for building or maintaining good credit.
More on Mortgages and Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Get Pre-Approved for a Mortgage
- How to Search for Your Next Home