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Considering a condo? A condo could be a good choice as a starter home, a retirement nest, an investment property, or a residence for anyone who wants amenities but little maintenance.

You’ll want to weigh the upsides and potential downsides and take these steps before committing to a condo.

What Is a Condo?

When a person buys a condo, as opposed to buying into a co-op, they own the unit in the building or complex, but they don’t own anything outside those four walls. That includes the structure of the building, the roof, and the ground the building sits on.

The parts of the property not owned directly by the condo residents are managed by a homeowners association. The HOA maintains the property with fees collected from residents.

If you’re weighing a condo vs. townhouse, it helps to understand these key differences.

Recommended: Mortgage Prequalification vs Preapproval

What Are the Pros and Cons of Buying a Condo?

Ultimately, the choice to buy a house or condo will be based on the buyer’s preferences and budget.

Pros of buying a condo include:

•   Affordability. Generally, a condo will cost less than a detached single-family home so your monthly home loan payment may be more affordable.

•   Amenities. If it’s important to have access to a pool, gym, dog park, or parking garage, a condo might fit the bill.

•   Lower home insurance and property taxes. Because condo owners aren’t directly responsible for the exterior of the building, home insurance is less than for a single-family home.

•   Low maintenance. Beyond maintaining the immediate residence, condo owners don’t have to worry about mowing the lawn or replacing the roof on their own.

•   Lower utility bills. As condos are generally smaller than single-family homes, there are lower utility bills.

•   City settings. Condos are more likely to crop up in densely populated areas, making them an affordable entry point for owning property in an urban setting.

Is a particular condo within your means? Check out this home mortgage calculator.

There are plenty of upsides when someone buys a condo, but here are some downsides:

•   Privacy. Condos are shared residences with communal space. If buyers value privacy and their own outdoor space, a condo might not be a good fit.

•   Building rules. Condo boards dictate how a building is run, including if units can be rented, what colors can be used on exteriors, and whether pets are allowed.

•   HOA fees. Since maintaining the building is a collective responsibility, condo owners pay monthly or quarterly fees to the HOA. The fees are likely to rise every year. A sizable special assessment may be charged for major repairs.

•   Smaller space. Condos vary in size, but they’re unlikely to be as large as most single-family homes.

•   Slow appreciation. Condos tend to appreciate more slowly than single-family homes, but appreciation is also based on location and the market.

Things to Do Before Buying a Condo

Still not sure if a condo is the right fit? Before figuring out how to purchase a condo, consider these eight steps.

1. Consider Your Lifestyle

A condo could be a perfect fit for highly social people who prioritize proximity over privacy. Since condos tend to be smaller, the ideal condo owner should enjoy the communal offerings of the building, including everything from pools to pickleball.

As condos are often in cities, it could be the right fit if being close to the hustle and bustle is important to a buyer.

People who are downsizing often find a condo a good choice. Buyers who dread upkeep can own a home without mowing a lawn or maintaining a roof.

On the other hand, if a buyer values privacy and space, a condo might clash with their sensibilities. A condo won’t give them that opportunity if they want storage or a garden.

2. Work With an Agent Who Has Experience in Condos

Buying a condo with an agent specializing in single-family homes is like going to the dentist for an earache. Finding the right agent is about personality fit and experience. When interviewing agents, ask about what types of properties they buy and sell regularly. An agent with a lot of experience in condo sales will be more familiar with buildings in the area and their HOAs, amenities, and property management.

3. Consider the Pros and Cons

The perfect property doesn’t exist, so it’s worth weighing the pros and cons of condo living compared with a single-family home that’s not in an HOA community:

4. Decide What Type of Amenities You Want

If a condo feels like the right fit, it’s time to decide which amenities are musts and which are simply nice to have.

Amenities could include:

•   Pool

•   Dog park

•   Fitness center/spa

•   Tennis, pickleball, or basketball courts

•   Covered parking or parking garage

•   Business center/party rooms

•   Rooftop deck

•   Landscape management/gardens

•   Valet

•   Onsite programming or events

Once buyers understand what they need and what they don’t, they can more efficiently narrow down condos in the area based on amenities. Of course, the more amenities, the higher the maintenance fee will be.

5. Find an Approved Condo Community

Condo buyers who qualify for a Federal Housing Administration loan will need to find an FHA-approved condo community, one that meets requirements set by the U.S. Department of Housing and Urban Development. Buyers can search for these properties using HUD’s database.

Buyers wanting to use a VA loan can check a different database.

Most conventional mortgage lenders will require a “limited review” of most condominiums in the form of a questionnaire sent to the HOA. Among the criteria: Ten percent of HOA dues must be allocated to reserves, less than 15% of units must be in arrears with dues, and more than half the units must be owner-occupied.

Want to learn more about mortgages? Visit a help center for home loans.

6. Research the Property Management Company

Diving deep into property management is an important step of what to look for when buying a condo.

Before settling on a property, it’s important to research the property management company hired by the HOA to maintain the building. Consider double-checking on its licensing, reviews, and if there’s any ongoing litigation against the management company.

7. Review HOA Fees and Regulations

Hand in hand with researching the property management company is reviewing the HOA fees and regulations. HOA fees may be charged to condo owners monthly or quarterly, and range from a couple hundred a month to thousands. The fees could cover:

•   General upkeep and maintenance

•   Shared amenities

•   Some utilities

•   Security

•   Future upgrades

•   A master insurance policy to cover liability and repairs for common areas

If possible, request minutes from HOA meetings or inquire about recent hikes in fees. If the HOA doesn’t have much in reserves or is anticipating increases in fees, that can affect a buyer’s monthly housing budget.

In addition to researching fees, take a close look at the covenants, conditions, and restrictions, known as the CC&Rs. HOAs can impose regulations regarding:

•   Pets in the building

•   Renting out property

•   Use of common areas

•   Renovation or maintenance of owner units

Some HOAs have stricter regulations than others. For example, investors may want to avoid buying a unit in a building where rentals, or short-term rentals such as Airbnbs, aren’t allowed.

8. Ask About Special Assessments

Special assessments are one-time payments required of condo owners when reserves won’t cover a major expense. The HOA may require a special assessment if an elevator breaks or the roof unexpectedly begins leaking.

It’s a good idea for any condo hunter to ask when the last special assessment was collected. If there’s a history of frequent payments, it may be a sign of HOA mismanagement. Ideally, the HOA should have money set aside in case of an emergency.

If possible, ask the listing agent for the HOA’s financial statements to reveal how much the building has in reserves. If it’s low, there’s a chance of a special assessment in the future.

Recommended: Tips to Qualify for a Mortgage

The Takeaway

Condo living offers amenities, city living, and affordability. But buying a condo requires research. Working with the right agent and doing due diligence on the condo complex, its HOA, and its management company can help direct your home search.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What should you avoid when buying a condo?

Red flags to look for when buying a condo include issues with the HOA and ongoing litigation with the property management company. Condo buyers would be smart to review the building’s financial records for reserve funds, lawsuits, and delinquencies.

Are condos hard to resell?

A condo that’s a good value for the current market and that is in a desirable area will likely not be hard to sell. In general, condos don’t appreciate as quickly as single-family homes, however.

Should you invest in condos?

Investing in condos will generally be less expensive than investing in single-family homes, but it’s worth examining the HOA bylaws to ensure that the condo can be rented out, and for how long at a time.

Photo credit: iStock/Sundry Photography

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

Deciding whether to pick a 15- or 30-year mortgage largely boils down to what kind of monthly payment you can afford and whether you need financial flexibility.

There’s a reason that the 30-year fixed-rate mortgage is most popular by far: Manageable payments that ideally allow room for other needs and wants.

But borrowers who can afford the higher monthly payments of 15-year mortgages, and who like the lower rate, may find them compelling.

How Does a 15-Year Mortgage Work?

Borrowers who opt for a 15-year mortgage when choosing a mortgage term will pay off their loan faster and save significantly more in interest over the life of the loan. (Here we are talking about fixed-rate home loans, not variable-rate ones; the latter can be useful in certain situations but are more complicated.) The main trade-off if you choose a 15-year loan is the fact that your monthly payment will be significantly higher than a comparable 30-year home loan.

Fifteen-year mortgages typically carry lower interest rates than 30-year mortgages. Consequently, the combination of a lower rate and compressed payoff time means a much lower interest cost overall.

A 15-year mortgage loan for $300,000 with a rate of 4.6% would result in $115,860 in interest paid. That same loan amount with a 30-year term at 5.8% would translate to about $333,700 in interest, a difference of $217,840.

The basic monthly payment, however, would be $2,310 vs. $1,760 in this example. Use an online mortgage calculator to compare home loans.

Lenders charge lower rates for 15-year mortgages because it costs them less to underwrite 15-year mortgages than 30-year loans. Generally speaking, the longer term a loan, the riskier it is to lenders, which they price into the loan through a higher interest rate.

Here are the main pros and cons of 15-year mortgages.

When to Consider a 15-Year Fixed-Rate Mortgage

You might want to consider a 15-year fixed-rate mortgage if you’re trying to pay off the loan faster, you want to save on total interest paid, want a lower rate, and can afford the higher monthly payments.

If you’re buying a home close to retirement and you’re interested in building generational wealth, a 15-year mortgage also is an attractive option as it ensures a faster payoff.

The 15-year mortgage is more frequently used for refinancing than buying, thanks to the lower rate and because most borrowers who choose to refinance are usually several years into their loan.

Consequently, borrowers who have longer-term mortgages with higher interest rates may want to consider refinancing to a 15-year home loan to save on interest costs. However, if you qualify as a first-time homebuyer or are already on a fairly tight budget, a 15-year mortgage might be more than your family finances can handle.

30-Year Mortgage vs. 15-Year Mortgage

Borrowers will find the payments on 30-year mortgages to be much more affordable than on 15-year mortgages. The longer the repayment term, the lower the monthly payment, potentially leaving more cash in your pocket every month.

Increased cash flow may allow borrowers to pursue other opportunities like preparing for retirement or shoring up emergency savings. Paying off higher-interest debt is also a good plan.

Homeowners may want to have enough cash to add or expand a home office, rev up the kitchen, and generally maintain the value of their home.

What about vacations and buying stuff? Yes and yes.

And some buyers will want to set up a college fund.

Like most things, 30-year home loans have upsides and downsides to consider.

When to Consider a 30-Year Fixed-Rate Mortgage

You may wish to consider a 30-year fixed-rate mortgage if you’re looking for the most affordable option when buying a home.

Fixed-rate 30-year home loans are the most straightforward and common type of mortgage loan on the market.

Given that home prices are relatively high and interest rates have not dropped substantially in recent years, 30-year home loans have started looking more attractive than other options. Despite the higher overall interest cost, the lower monthly payments on 30-year mortgages make it easier to afford a home.

Borrowers always have the option of paying off the mortgage early. Every extra principal payment reduces your overall loan balance and reduces the amount of interest that compounds over time as well.

The final thing to consider is that a 30-year mortgage provides a greater tax benefit than a shorter-term mortgage if you take the mortgage interest deduction.

Recommended: Mortgage Prequalification vs. Preapproval

Should You Choose a 15-Year or 30-Year Mortgage?

For many homebuyers, the choice of 15- vs. 30-year mortgage will not be voluntary: The monthly payments will force the decision.

If you are able to choose one or the other, you’ll want to consider whether you’re able to comfortably commit to a series of high monthly mortgage payments in exchange for the earlier loan payoff and interest savings, or whether any money left over monthly after making the relatively low mortgage payment on a 30-year loan could be put to other uses.

Your income level, career stability, and debt-to-income ratio may largely determine your course.

Recommended: Home Loan Help Center

The Takeaway

The decision on a 15- vs. 30-year mortgage depends on your personal budget and financial goals. If you can swing the shorter term, you’ll benefit from a lower interest rate, faster loan payoff, and substantial interest savings.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is a 30-year mortgage better than a 15-year mortgage?

A 30-year mortgage has lower monthly payments, but a 15-year loan will have less interest over the life of the mortgage. Which is better is a matter of personal choice and affordability.

Is it better to pay off my mortgage for a long period?

If your monthly budget is fairly tight or you have other debts you need to pay off, yes. You’ll pay a lot more in total interest with a long-term home loan than you would with a shorter-term one, but payments will be more affordable.

Can I pay off my 30-year mortgage in 15 years?

Yes, you can pay off the balance ahead of schedule but read your mortgage documents first: Some loans have a prepayment penalty.

Are the interest rates for a 30-year mortgage higher than a 15-year mortgage?

Yes, the interest rates for 30-year mortgages are typically higher than 15-year mortgages because of the extra risk of longer-term loans.

Photo credit: iStock/Tatomm

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q324-040

Guaranteed by the Federal Housing Administration, FHA 203(b) and FHA 203(k) loans are both types of mortgages with more flexible credit and income requirements than conventional mortgages. While the FHA 203(b) loan is the flagship loan program for homebuyers, 203(k) loans can help you buy a fixer-upper in need of significant repair. A 203(k) loan can roll repair costs into the mortgage amount. Learn more about FHA 203(b) vs 203(k) and their key similarities and differences.

Note: SoFi does not offer FHA 203(b) or FHA 203(k) loans at this time.

FHA 203(b) Loans

Often simply referred to as FHA loans, FHA 203(b) loans are mortgages for homebuyers. Current homeowners can also use FHA 203(b) loans to refinance their home loan.

What Is an FHA 203(b) Loan?

FHA 203(b) loans are insured by the Federal Housing Administration and may be more accessible to borrowers with less-than-stellar credit or a high debt-to-income ratio than conventional mortgages.

There’s lots to learn about the basics of FHA loans, but here are some highlights: You can use one to purchase a single-family home or a property with up to four units. (FHA borrowers must make the property their primary residence for at least one year.) Whatever type of property you choose, it must pass the FHA’s appraisal and inspection standards. Basically, the home must be in good condition and not require major repairs or renovations.

FHA loans come with both upfront and annual mortgage insurance premiums. The upfront cost is 1.75% of your loan amount and is collected at closing. The annual costs vary depending on your loan-to-value ratio and other factors. You’ll pay MIP (mortgage insurance) for 11 years if your down payment is 10% or higher. If your down payment falls below 10%, you’ll pay MIP for the life of the loan.

Eligibility Requirements

While FHA 203(b) loans are insured by the Federal Housing Administration, you’ll have to apply for one through a participating lender, such as a bank or credit union. Here are the eligibility requirements borrowers must meet:

•   Credit score of 500 or higher: You can qualify with a credit score as low as 500 if your down payment is at least 10%. If your down payment is lower, you generally need a credit score of 580 or higher.

•   Down payment of at least 3.5%: You must provide a minimum down payment for an FHA loan of 3.5%, but a down payment of 10% or higher can mean a lower credit score requirement and fewer years of MIP payments.

•   Debt-to-income (DTI) ratio no higher than 43%: Your DTI compares your monthly debt obligations with your income.

•   Loan size that falls within FHA limits: The limits vary by property size but currently fall between $524,225 and $1,209,750 for one-unit properties.

Property Requirements

You won’t need an inspection to obtain an FHA loan, but before a lender can issue you an FHA 203(b) loan, an official appraiser needs to check that the property meets FHA standards for safety, security, and soundness. The appraiser will check out the interior and exterior of the home and look for features such as:

•   Functional home systems and appliances

•   A well-ventilated basement or crawl space

•   Working plumbing with hot and cold water

•   A roof with at least two years of life left

•   A durable foundation with sufficient drainage

The home must meet the FHA’s minimum property standards in order to be eligible for FHA loan financing. It should also adhere to FHA flipping rules, designed to prevent borrowers and lenders from falling prey to fraud.

Found a home that needs significant work? Then you might be better off with an FHA 203(k) loan.

FHA 203(k) Loans

The FHA 203(k) loan program is geared toward fixer-uppers that need major repairs. Here are the details of FHA 203(k) loans, including how they work and their eligibility requirements.

What Is an FHA 203(k) Loan?

FHA 203(k) loans help homebuyers finance the purchase of a home and the costs of its repairs in a single mortgage. There are two types: the limited 203(k) loan and the standard 203(k) loan.

The limited 203(k) loan lets you finance up to $35,000 in your mortgage for repairs and upgrades. The standard 203(k) loan doesn’t specify a maximum limit, but it’s designed for major repairs that will cost at least $5,000.

The total property value and cost of repairs, however, must still fall within the FHA’s maximum mortgage limits. Some projects that a 203(k) loan could cover include:

•   Fix water damage

•   Perform electrical repairs

•   Repair or replace major appliances

•   Repair termite or pest damage

•   Complete unfinished renovation projects

Eligibility Requirements

The eligibility requirements for an FHA 203(k) loan are similar to those of an FHA 203(b) loan. You’ll need a credit score of at least 500 or 580, depending on your down payment size, and a DTI ratio no higher than 43%. The minimum down payment requirement is 3.5% and the loan comes with upfront and annual MIP costs.

Property Requirements

If you apply for a 203(k) loan, an official appraiser will check out the property and gather details on its interior and exterior structure. The home must be in need of at least $5,000 in repairs to qualify for the standard 203(k) loan. You generally need to complete the work within six months.

Recommended: Home Loan Help Center

Comparing FHA 203(b) and FHA 203(k) Loans

In a survey of FHA 203(b) vs. 203(k) loans you’ll see lots of similarities. Both are insured by the FHA and have less strict credit and DTI requirements than conventional mortgages. Plus, they require only a 3.5% down payment, making them accessible to homebuyers with limited funds upfront.

However, 203(b) loans are meant to help you buy a turnkey house that is more or less move-in ready. The home must meet the FHA’s minimum property standards and not have any major structural issues or damage.

A 203(k) loan, on the other hand, can be used to finance a fixer-upper that needs work. This type of loan lets you roll the repair costs into the mortgage so you don’t have to pay for them out of pocket. However, you’ll need to finish the work within a certain time frame.

Deciding Between FHA 203(b) and FHA 203(k)

A 203(b) loan is the more common choice among FHA loans. It could be a good fit if you want to buy a home or invest in a property that’s in relatively good condition. An FHA 203(k) loan, meanwhile, could make sense if you’re looking to buy a home in need of repair. Keep in mind, though, that you’ll end up paying interest on any repair costs that you roll into the mortgage. Plus, FHA 203(k) loans can have slightly higher interest rates than their 203(b) counterparts.

Recommended: Tips to Qualify for a Mortgage

Applying for FHA 203(b) and FHA 203(k) Loans

If you’ve studied an FHA loan guide and think this type of loan is for you, you can apply for an FHA 203(b) or 203(k) loan with a lender that issues these types of loans. It’s a good idea to explore your options for both FHA loans and conventional mortgages to determine which type of financing would be most affordable for you.

Lender Requirements

The lender has to abide by Federal Housing Administration criteria, but they might set even higher requirements. Some companies, for example, will only consider potential FHA borrowers with a credit score of at least 580. It could be worth shopping around to find a lender with requirements that you can meet for credit score, DTI ratio, and other financial factors.

Required Documentation

As with any type of mortgage, you’ll need to provide a bunch of documentation to get an FHA loan. This may include:

•   Income tax returns

•   W-2s or 1099s

•   Pay stubs

•   Bank account statements

•   Investment account statements

•   Identification

The lender will also run a credit check to review your credit.

Application Process

You’ll need to fill out an application for your FHA loan with your personal and financial details, as well as information on the property and your down payment amount. After submitting the application, you’ll likely encounter the following steps:

•   Schedule an appraisal: An FHA-approved appraiser will evaluate the property and determine its market value.

•   Wait for loan underwriting: The lender will verify your information and process your loan. You may be asked to submit additional information or documentation during this time.

•   Close on your loan: Once everything goes through, you can close on your loan, provide your down payment, and move forward with purchasing your new home.

If you’re applying for an FHA 203k loan, you may need to work with a consultant, who will estimate repair costs for the home. Working with a licensed contractor who understands the 403k loan requirements may also be part of the process. Once the work is finished, the consultant will evaluate the project to ensure it meets FHA standards.

The Takeaway

FHA loans can be a useful financing option for homebuyers who may not be able to meet the credit and DTI ratio requirements for a conventional mortgage, though they do come with mortgage insurance premiums that can increase the cost of borrowing. A 203(b) loan can help you purchase a move-in ready home, while a 203(k) loan can be used to finance renovations and repairs.

FAQ

Can I use an FHA 203(k) loan for a new construction home?

FHA 203(k) loans can only be used for properties that are at least one year old.

Are there limits on the renovation costs for an FHA 203(k) loan?

With a limited FHA 203(k) loan, homebuyers can finance up to $35,000 in their home loan to repair their home. A standard 203(k) loan, on the other hand, can finance major rehabilitation and repairs as long as the costs are at least $5,000. The total cost of the loan and renovation cannot exceed the FHA Maximum Loan Limit which in 2025 is $524,225 for a single-family home in most places.

Are interest rates different for 203(b) and 203(k) loans?

FHA 203(k) loans typically have interest rates that are about 0.75% to 1.00% higher than standard FHA loans, according to The Mortgage Reports.

Photo credit: iStock/andresr

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q324-020

Homebuyers who want modern touches and few maintenance worries may opt to purchase new construction or have a home built to order.

In mid-2024, the median price of a new home was $429,800, according to the U.S. Census Bureau. As homebuyers have found a shortage of existing homes on the market in recent years, new-home construction has worked to fill the gap and consumers may find builders offering incentives to choose new construction. You’ll want to understand the market and learn some of the lingo.

Understanding New Construction Homes

On the upside, newly constructed homes can come with warranty-backed electronics, energy efficiency, and high-end features.

But new construction isn’t without potential snags, such as construction delays and the mounting price of upgrades.

The type of new construction you choose will determine cost and ability to customize and may also affect your home loan options.

•   Tract homes. These go up in a builder’s new development. The buyer chooses the lot and design features.

•   Spec homes. These are move-in-ready homes, but the buyer still might be able to choose some of the finishings. It’s a good idea to understand the difference between standard property features and upgrades.

•   Custom homes. A builder tailors a house to the buyers’ specifications on their land.

How Do I Buy a New Construction Home?

A first step is to get preapproved for a mortgage and hire a real estate agent. You’ll choose a builder, go over your desired home features, and sign the builder contract, which will include the anticipated timeline, the cost, and all other details.

Mortgage options for a tract or spec home are the same as buying an existing home: conventional or government-backed home loans.

Those who are building a custom home might use a construction loan for the build and then obtain a mortgage once the home is complete. There are, however, FHA, VA, USDA, and conventional construction-to-permanent loans, also called single-close loans.

Figuring Out the Costs of New Construction

How much does it cost to build a new house? For 2,500 square feet, it could cost $345,000, but of course, there are lots of variables, including location, the price of labor and materials, and your tastes.

For a spec home, it might be a good idea to look at comparables in your area. For a new build, HomeAdvisor suggests budgeting the amount each project of the home requires as well as the necessary time to build.

In normal times, expect to spend about 50% of your budget on materials, HomeAdvisor says.

Buying a staged model house? The upgrades are considered marketing costs, and the home may have been walked through many times. You might have lots of room to negotiate.

Pros and Cons of Building or Buying a New Construction Home

Buying new has its pros and potential cons.

Pros

Everything’s New. Novelty can be a lure all its own. From a practical standpoint, new items signal less maintenance for years.

Additionally, with a from-scratch property, homebuyers may also be able to build their house on the precise plot of land that they want. Buying an existing home could mean having more neighbors nearby or less choice about the size or borders of the property.

Warranties. Appliances, roofing, and the HVAC system may be covered by manufacturer and construction warranties. Replacement or repair may be guaranteed for years, which can be a big relief when buying new construction as opposed to buying an existing home. Ask most homeowners about typical home repair costs. They are the opposite of fun.

Energy Efficiency. Homebuilding has been moving toward energy efficiency, or green architecture. Features like solar panels, treated windows, efficient lighting, and energy-saving appliances curb home energy expenses over the life of owning a home.

Reduced Homebuyer Competition. If a buyer opts to build a new home on an undeveloped tract of land, chances are low that a competing homeowner wants to build in that exact location at the same time.

Benefitting From Buying Discounts. A local contractor has ties to building supply companies and hardware stores. These business-to-business connections may translate into lower costs.

Cons

Land-Starved Locations and Zoning. The denser a community — think a big city or large suburb — the harder it may be to find land to build on. Moreover, local zoning regulations often regulate the size and type of new homes that can be built on residential lots.

Potential Building Delays. It takes 7 to 12 months on average for a contractor to build a house, and 12.1 months for an owner to, according to census data. That’s a significant wait, but building delays are fairly common and add to the bottom line. If a homebuyer needs to rent, for instance, while the house is being constructed, any delays could mean extra housing expenses.

New-home buyers can prepare for changes by touring similar finished homes in the community, researching the builder’s reputation, and speaking to residents. It’s also a good idea to talk with the builder about common construction delays and how unexpected costs are handled.

Negotiating Price May Be Harder. When working with a homebuilding company, negotiating may not be possible. Many builders attach a minimum price to the construction of a new home.

Upgrades Add Up. If wood floors, glass-front cabinets, and premium tile are must-haves, be prepared to pay for them. There is usually a “starting-from” price attached to newly constructed homes. Upgrades can add substantial costs to a new home.

Buying Tips for Newly Built Homes

Prepare to breathe in that new-house smell, but first lay the foundation.

Line Up Financing

When it comes to buying any type of house, getting prequalified is good. Getting preapproved is more serious, because you will have let lenders vet your finances and give you a specific amount you qualify for.

Lenders can also recommend the best kind of financing for a new build.

Hire a Real Estate Agent

Homebuyers wanting to make a new dream home a reality may want to find a good real estate agent. Here’s one reason why that’s important: The sales contact from the home construction company is hired to represent the seller (i.e., the builder or developer). A buyer’s agent can champion buyers’ interests, negotiate the contract, and answer questions.

Ask for Builder Concessions, Sign the Contract

Homebuyers aren’t likely to get a builder to slash a new home’s sales price, but they might be able to gain some concessions. Some builders may offer upgrades at a reduced price to incentivize a homebuyer to buy.

Upgrades may come in the form of a higher grade of carpet, granite countertops, a more advanced HVAC unit, or higher-end kitchen appliances. It doesn’t hurt to ask.

Once you’re pleased with your decisions, you’ll sign the builder contract to buy a spec home or start construction on a home.

The Takeaway

Newly constructed homes have obvious appeal, but they can come with potential delays and other drawbacks. Buyers who have their heart set on a brand-new home will find that financing often works the same way as it does for an existing-home purchase.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Can you negotiate the price of a new construction home?

Negotiating the price of a new construction home can be challenging as many builders set a minimum price. However, it might be possible to negotiate upgrades or concessions instead of a price reduction. Homebuyers can work with a real estate agent to help them negotiate with the builder.

What is a realistic budget for building a house?

A realistic budget for building a house will vary depending on the location, size, and desired features. In general, a 2,500 square foot home requires a budget of around $345,000, not including the cost of land. But cost can increase or decrease depending on the specific materials and finishes chosen.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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SOHL-Q324-056

If you’re looking for a safe place to invest and grow your money, you might be considering both certificates of deposit (CDs) and U.S. Treasury bills (T-bills). Both investment options offer steady and predictable returns, while protecting your principal. However, there are some key differences between them, including how long you need to lock up your money, initial investment requirements, and how your earnings will be taxed. Read on for a closer look at T-bills vs. CDs.

What Is a Certificate of Deposit?

A certificate of deposit, commonly referred to as CD, is a type of savings account offered by banks and credit unions. You can also get CDs through brokerages, called brokered CDs, though these are still issued by banks. When you open a CD, you deposit a set amount of money into the account and agree to leave it there for a specific period of time, which generally ranges from three months to five years.

CDs pay a fixed interest rate that is typically higher than the average annual percentage yield (APY) for savings accounts. If you withdraw your money early, however, you will likely have to pay a penalty, often in the form of interest earned over a certain time period.

Like other types of savings accounts, CDs are insured, which means you get your money back in the unlikely event your bank goes bankrupt. CDs at banks insured by the Federal Deposit Insurance Corporation (FDIC) are typically covered up to $250,000 per depositor, per ownership category, for each insured bank. Co-owners of joint accounts at the same bank are typically each insured up to $250,000. Credit unions offer similar insurance through the National Credit Union Administration (NCUA).

Pros and Cons of CDs

CDs come with a number of benefits, but also have some drawbacks. Here’s a look at some of the top reasons you might or might not want to invest in a CD.

Pros

•   Guaranteed returns: CDs offer a fixed interest rate, so you know exactly how much you will earn by the end of the term. Even if market interest rates go down, your CD rate will stay the same.

•   Safety: As FDIC- or NCUA-insured products, CDs provide a high level of security, protecting your principal up to $250,000.

•   Higher interest rates: CDs typically offer higher interest rates than traditional savings accounts, which can help your money grow faster.

Cons

•   Limited liquidity: Funds invested in a CD are locked in for the entire term of the CD. If you need to access your money before the CD matures, you will typically incur a penalty, which can eat into your earnings.

•   Could potentially earn more: While guaranteed, the returns on a CD can be lower than what you might earn with more aggressive (aka, higher-risk) investments like stocks or bonds.

•   Inflation risk: If the interest rate on your CD doesn’t exceed, or even keep up with, the rate of inflation, the actual purchasing power of your money can erode over the term of the CD.

What Are U.S. Treasury Bills?

Another safe way to invest your money is to buy U.S. Treasury bills. Also called T-Bills or Treasuries, Treasury bills are short-term government securities issued by the U.S. Department of the Treasury. Treasuries are backed by the full faith and credit of the U.S. government and considered one of the safest investments available.

When you buy a T-bill, you pay less than the bill’s face value, which is the amount you will receive at maturity. The difference between the purchase price and the face value at maturity is your interest earned. You’ll owe federal taxes on any income earned, but no state or local tax. T-bills are considered short-term securities because they mature in four weeks to one year.

Pros and Cons of Treasury Bills

Like CDs, Treasuries come with both benefits and drawbacks. Here are some to keep in mind.

Pros

•   Safety: T-bills are backed by the U.S. government, making them virtually risk-free if held until maturity.

•   Predictable returns: Returns are guaranteed, based on the agreed-upon rate of the Treasury bill that you purchase.

•   Tax benefits: The interest earned on a U.S. Treasury bill is exempt from state taxes, which can be a significant advantage for investors in high-tax states.

Cons

•   Lower returns: While safe, the returns on T-bills are generally lower than what you can potentially earn by investing in the market over the long term.

•   Inflation risk: Like all fixed-rate investments, if the rate you earn on your T-bill doesn’t exceed the inflation rate, the actual purchasing power of your money will diminish over the term of the Treasury.

•   Market risk: While treasuries are stable, their value can fluctuate over time. If you sell before the T-bill reaches maturity, you may not get as much interest as you expected.

Recommended: 7 Places to Put Your Cash

Comparing CDs vs Treasury Bills

While CDs and Treasury bills have a number of similarities, there are also some key differences that you’ll want to understand before investing in either one. Here’s a closer look.

Tax Implications

One key difference between CDs and Treasuries is that interest on CDs is taxable at the federal and state level. Treasuries, on the other hand, are exempt from state income tax. If you are investing in a taxable account and live in a state with a high income tax, this can make investing in Treasuries attractive.

Another tax difference: With CDs, you pay taxes on interest earned the year it is added to the account, whether you cash out the CD or not. With Treasuries, the interest you earn is only taxable when you sell the T-Bill, which may be a different tax year than the year in which you bought it.

In both cases, the interest you earn will be reported on Form 1099-INT.

Expected Earnings

With both a CD and a Treasury bill, you’ll know beforehand how much interest you’ll earn if you hold it until its maturity. If you sell a CD early, you may forfeit some or all of your expected interest and also possibly pay a penalty. Selling Treasury bills before they reach their maturity may be possible (since there is a secondary market for them) but if you do, you may not earn all the interest you would earn if you held it to its maturity.

Other Key Details to Consider

When deciding whether to put your money in T-bills or CDs, here are some other factors to keep in mind.

•   When you’ll need the money: T-Bills are more liquid than CDs since they typically have shorter maturities and can be sold on the secondary market. If you need access to your funds quickly, T-Bills may be the better option. While you can sell a CD before maturity, doing so typically incurs a penalty that can reduce your returns.

•   Initial investment amount: The minimum investment for opening a CD varies by bank but is typically at least $500. The minimum purchase amount for Treasury bills is $100. A higher initial investment requirement could make opening a CD difficult if you are just starting out and don’t have a lot of extra cash to invest.

•   Interest rate environment: While T-bills and CDs generally offer comparable rates, you may want to consider time to maturity and where interest rates could be headed. If interest rates are expected to fall, for example, locking in a good rate on a multi-year CD could be a smart move.

How To Purchase CDs and Treasury Bills

You can buy CDs directly from banks and credit unions, either online or in-person. Rates and terms vary by institution, so it’s generally a good idea to shop around to find the best CD for your needs. You typically don’t have to have an existing account at a bank or credit union to open a CD.

You can purchase Treasuries either through a brokerage firm or directly from the U.S. Department of the Treasury at TreasuryDirect.gov. The most commonly offered maturity dates are four weeks, eight weeks, 13 weeks, 17 weeks, 26 weeks, and 52 weeks. T-bills are sold in increments of $100, and the minimum purchase is $100.

Similar Investments to Keep in Mind

If you are looking for a relatively safe place to park your savings and earn a decent return, there are other options besides T-bills and CDs. Here are some to consider.

•   Series I savings bonds: I bonds are a type of U.S. savings bond with an overall rate that is based on both a fixed rate that never changes and a variable interest rate,designed to keep up with inflation, that resets every six months. You need to hold the bond for at least one year and will pay a penalty if you cash out before five years. Like T-bills, interest payments are exempt from state taxes.

•   Money market fund: A money market fund is a type of mutual fund that invests in CDs, short-term bonds, and other low-risk investments. The money you invest is liquid, and yields are typically higher than regular savings accounts. However, the funds are not protected by the FDIC or NCUA.

•   High-yield savings account: While not technically an investment, high-yield savings accounts pay more than the average APY for savings accounts, while offering more liquidity than CDs or T-Bills. Your money is insured, but the APY on a high-yield savings account isn’t fixed, meaning it can rise or fall depending on market rates.

The Takeaway

CDs and Treasury bills are both considered safe investments, allowing you to earn a guaranteed return without putting your initial investment at risk. However, there are some key differences that can make one a better fit than the other.

T-bills often have shorter terms than CDs, making them a good option for a savings goal that is a year or less down the road, like buying a car. With some terms as long as five years (or more), a CD may work better for a longer-term savings goal, such as making a downpayment on a home. If you’re looking for safety and competitive returns along with liquidity, you might also consider putting your money in a high-yield savings account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Are CDs and Treasury bills considered safe investments?

Yes, both certificates of deposit (CDs) and Treasury bills (T-bills) are considered safe investments. CDs offer a fixed interest rate over a specified term, and are typically insured up to $250,000, making them low-risk. Treasury bills are short-term government securities backed by the U.S. government, making them one of the safest investments available. They are sold at a discount and mature at face value, with the difference representing the investor’s interest. Both options can be ideal if you’re a conservative investor seeking minimal risk.

Should I keep my emergency fund in a CD or Treasury Bill?

You generally want your emergency funds to remain highly liquid and easily accessible, so a regular savings account can work better than a certificate of deposit (CD) or Treasury bill.

CDs usually require you to leave your funds untouched for a fixed term, with penalties for early withdrawal. Treasury bills also tie up your money, though terms are relatively short (typically four weeks to one year). A Treasury bill might work for an emergency fund if you have other funds you can tap in a pinch before the maturity date. Otherwise, consider keeping your emergency cash in a high-yield savings account or a money market account.

How do CDs and Treasury bills differ from savings bonds?

Certificates of deposit (CDs), Treasury bills, and savings bonds are all low-risk investments, but there are some key differences between them.

•   CDs offer fixed interest over a specific term, and are typically used for short- to medium-term savings goals.

•   Treasury bills are short-term government securities that mature in a year or less and are sold at a discount.

•   Savings bonds, such as Series I and EE Bonds, are long-term government bonds with interest that compounds semi-annually. They are generally intended for long-term savings goals, such as education or retirement.

Photo credit: iStock/Liudmila Chernetska

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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