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How to decide between a condo versus a house

Yahoo Personal Finance· Getty Images
Updated 4 min read

Buying a house is a major financial decision, particularly when deciding between purchasing a condominium versus a single-family home.

For example, if you have a big family, you might be willing to pay more for a single-family home because it tends to come with larger square footage and a yard. However, a condo is often smaller, more affordable, and easier to maintain.

Both options have distinct features to consider before determining whether a condo versus a house is the right place for you and your family.

A condo is a part of a larger structure of units, so you will likely share a wall with another resident, whether next to you, above, or below you. A condo can range from a handful of units within a building to dozens of units in a high-rise complex.

Typically, with condos, you own the inside dwelling, and the outside is maintained by a homeowners' association (HOA), which usually charges a monthly or quarterly fee to unit owners for certain insurance, upkeep, and amenities. The HOA board is primarily a group of unit owners, but it can be professionally run by a management company.

The HOA might offer amenities like a community pool, gym, parking, or lawn care. And condos tend to require less maintenance than a single-family home because you are paying the HOA to provide this. Some might also cover certain utilities, like if the water is shared within a larger building.

Every HOA has different offerings and fees, so it’s critical that you review all of their rules, regulations, and costs prior to agreeing to purchase the condo.

Learn more: How an FHA-approved condo works and how to buy one

If you need a mortgage to purchase a home, it’s vital to check with your lender whether they have any restrictions on financing a condo and their requirements for the HOA. Lenders tend to be stricter with condos and HOAs, which could block you from getting loan approval or cause you to pay more for the mortgage.

For example, some mortgage lenders will not approve the mortgage or require you to provide a larger down payment if the HOA has no cash reserves. So, it’s important to know whether that HOA is well managed and properly funded.

Lenders will also calculate your HOA costs when determining whether to approve you for a mortgage. You should add the HOA fees to your overall monthly housing costs ahead of time so you don’t hit snags in the mortgage process and lose your offer on the condo. Some HOAs might charge a few hundred dollars per month, while others charge more than $1,000 in monthly fees, especially if it’s an upscale high-rise condo in a popular destination, such as a beach.

A single-family home is a free-standing structure, meaning, there’s usually no shared walls and it sits on its own land. Typically, you also own the land that it sits on.

If you prefer to have yard space, a garage, or more square footage, then a single-family home is your better option. But they do tend to come at a higher price tag than a condo, depending on the area where you want to live.

Read more: How to decide between a single-family vs. multifamily home

Many single-family homes do not have HOAs, meaning you can customize the outside of your home and land how you wish. However, some single-family home communities have HOAs and/or maintenance fees to help with upkeep of the neighborhood or to offer residents amenities like a community pool, park, or tennis courts.

If your neighborhood has an HOA, review the costs and rules before purchasing because some are more restrictive than others. For instance, some HOAs might have a pet or noise restriction or require your lawn to look a specific way. Not following the HOA rules could cause you to pay additional fines and even create problems with your mortgage lender.

When deciding between purchasing a condo versus a house, the choice for the best type of home comes down to your preferred lifestyle, where you want to live, and how much you can afford.

If you want to live in a big city or own an oceanfront property on a popular beach, then a condo might be the more affordable — and most available — option in that area. Alternatively, if you have a large family and space is more critical, then a single-family home might better suit your needs.

Here are some key questions to ask yourself:

  • What is my monthly housing budget?

  • Where do I want to live?

  • How much space or rooms do I need?

  • What is my monthly HOA or maintenance fees cap?

  • What additional amenities do I need (i.e., parking, pool)?

Having answers to those questions ahead of time will help you narrow down your search for the right home for you.