If someone asked you to describe your “dream home,” what picture would pop into your mind? A single-family home with a big backyard, or a high-rise condo with a view? Maybe you’ve always longed to live on a houseboat.
Only you can decide which of the many house types out there is best for you or your family. But this guide to the different types of homes available to buyers, and the pros and cons of each, could help narrow your search as you tally what you need to buy a house.
Common Types of Homes
The definition of an apartment can get a bit complicated because it can change depending on where you live. When someone talks about how to buy an apartment in New York City, for example, they might be referring to a condo or co-op.
Generally, though, an apartment is one of several residential units in a building owned by one person or company, and the owner rents each unit to individual tenants.
There are some pluses to that arrangement, especially if you take advantage of amenities like a gym or swimming pool. And monthly costs for utilities and insurance may be low. But because it’s a rental, you can’t build any equity. Also, if you want to stay or go, or make some changes to the apartment, you’re typically tied to the terms of your lease.
Pros and Cons of Renting an Apartment
|Don’t have to come up with a big down payment||May have to come up with a large security deposit|
|Repairs usually aren’t the tenants’ responsibility||Tenants don’t build equity (so there’s no return on investment)|
|Lower monthly bills (especially if rent includes utilities)||Tenants can lose their deposit if they break their lease|
|Amenities||Can’t make changes without permission|
If you like some of the upsides of apartment living but you want a chance to build equity with each payment, you may enjoy owning a condo. Condo living isn’t for everyone — a house vs. condo quiz could help you decide between those types of homes — but a condo is a good choice for some.
You’ll share walls with other residents but will own your unit. That means you’ll be in charge of the repairs and upkeep on the interior, but you won’t have to worry about lawn maintenance, cleaning and fixing the pool, or exterior repairs. (You’ll likely pay a monthly or quarterly fee to cover those costs, though).
When you purchase a condo, you’ll have a chance to build equity over time, but if the HOA is poorly managed, your condo may not increase in value the way a home you care for yourself might.
Pros and Cons of Buying a Condo
|Owners often can build equity||Owners pay for interior maintenance|
|Mortgage may be less expensive than that of a single-family home||Less privacy than a single-family home|
|Less maintenance than a single-family home||Condo fees add to monthly payment|
|Shared amenities||Single-family homes may increase in value faster|
When it comes to condos vs. co-ops, it’s important to understand the differences if you’re shopping for a home or plan to.
The main difference is the ownership arrangement: When you buy into a co-op, you aren’t purchasing your unit; you’re buying shares of the company that owns the property. The market value of your unit determines the number of shares you own. Your shares determine the weight of your vote in what happens in common areas, and you’ll also split maintenance costs and other fees with your fellow residents based on how many shares you own.
Because co-op residents don’t actually own the units they live in, it can be challenging to find financing. Instead of a mortgage, you may have to get a different type of loan, called a co-op loan or share loan. And because of co-op restrictions, it may be difficult to rent out your unit.
Still, buying into a co-op may be less expensive than a condo, and you may have more control over how the property is managed.
Pros and Cons of Buying into a Co-Op
|Often less expensive than a similarly sized condo||May be difficult to find financing|
|Shareholders have a voice in how the property is managed||May require a larger down payment than a condo purchase|
|Partners may have a say in who can purchase shares||Co-op restrictions can make it tougher to buy in, and to rent your unit|
4. Single-Family Homes
When someone says “house,” this is the type of structure most people probably think of — with a backyard, a garage, maybe a patio or front porch. Even if the yard is small, the house sits by itself, and the neighbors are usually at a distance. That can mean more privacy and more control over your environment.
Of course, that autonomy can come with extra costs, including higher homeowner’s insurance, taxes, maintenance and repairs, and maybe HOA fees.
The down payment and monthly payments also can be challenging, but buyers usually can expect the value of their home to increase over time.
And if you need money down the road — for a child’s education or some other planned or unexpected expense — you may be able to tap into home equity. Or you might plan to pay off the mortgage in 20 or 30 years and live rent-free in retirement.
Pros and Cons of Buying a Single-Family Home
|Privacy and control||Single-family homes tend to cost more than condos|
|Build equity if housing prices increase||Maintenance and repairs can get expensive|
|Change or update your house in any way you choose (following HOA rules, if they apply)||Property taxes and HOA fees can add to homeownership costs|
|Rent out your house if you choose, or renovate and sell for a profit||Putting in and maintaining a pool or gym may be up to the homeowner|
|Amenities as part of an HOA|
5. Tiny Houses
Tiny homes, which usually have 400 square feet of living space or less, have a huge fan base. Some tiny houses are built to be easily moved, giving the owner physical freedom. Some are completely solar-powered and built to be eco-friendly. Many can be constructed from kits.
One downside is finding a place to legally park the tiny home. In most parts of the country, they are classified as recreational vehicles, not meant to be lived in full time, and usually only allowed in RV parks or campgrounds.
Another challenge is tiny house financing. A traditional mortgage is a nice thought, but just that, for a true tiny house. Options include a personal loan, builder financing, a chattel mortgage (a loan for a movable piece of personal property), and an RV loan if the tiny house meets the Recreational Vehicle Industry Association’s definition of an RV: “a vehicular-type unit primarily designed as temporary living quarters for recreational, camping, or seasonal use.”
A not-tiny consideration is making use of such a small space. Many people may not last long in a tiny home. Still, the tiny house movement just keeps growing.
Pros and Cons of Buying a Tiny House
|Low costs all around||Limited legal parking locations|
|Environmentally efficient||Financing can be a challenge|
|Easy to relocate if on wheels||It’s tiny!|
A townhome or townhouse can look and feel a lot like a detached house, in that it has its own entrance and may have its own driveway, basement, patio or deck, and even a small backyard. But these row houses, which are often found in cities like New York, San Francisco, and Washington, D.C., and usually have multiple stories, share at least one common wall with a neighboring home.
Those shared walls can make buying a townhouse more affordable than a comparable detached home. And owners who belong to an HOA with neighboring homes generally don’t have to worry about exterior upkeep, although owners of townhouses classified as fee simple are responsible for exterior maintenance of their structure and sometimes the surrounding yard.
The HOA also may offer some amenities. But that monthly or quarterly HOA fee will add to overall costs, and may rise over time.
And you may not have as much privacy as you’d like.
Pros and Cons of Buying a Townhome
|May cost less than a similar single-family home||HOA fees may be high|
|Little or no outdoor maintenance||HOA restrictions|
|Shared amenities||Multiple levels may be a problem for some|
|Several mortgage options||Less privacy, more noise from neighbors|
7. Modular Homes
It might be hard for the average person to answer “what is a modular home?” off the top of their head.
A modular home is made up of sections that are built in a factory, transported to a homesite, and assembled on a foundation there. This makes them different from traditional stick-built homes, which are constructed completely on-site. But both types of houses are held to the same local, state, and regional building codes.
Because the assembly-line part of the process is cost-effective, a modular home may be less expensive. Also, because weather isn’t a factor for part of the work, you can probably expect fewer delays.
Most modular homes are sold separately from the land. So if you already own a piece of property or like the idea of building outside a traditional neighborhood, a modular home might be a good choice.
Many people who choose a modular home use a construction loan for the build or a construction to permanent loan. A personal loan or use of home equity from an existing home are other options.
Pros and Cons of Buying a Modular Home
|Can be less expensive than a similar stick-built home||Land, site prep, and other costs are separate on new modular homes|
|May experience fewer construction delays||Future buyers may prefer stick-built homes|
|Quality is as high or higher than a site-built home||Financing can be tricky|
8. Manufactured Homes
Manufactured homes, formerly known as mobile homes, are built completely off-site and then transported to the homesite and placed on a temporary or permanent foundation.
Manufactured homes are not held to the same local, state, and regional standards as stick-built or modular homes. Instead, they must conform to construction and installation standards set by the U.S. Department of Housing and Urban Development, and local land use and zoning regulations restrict where they can be placed.
Of course, there are plenty of communities that are designed just for manufactured homes, although the land in many of these “parks” is rented, not owned.
A growing number of lenders are providing conventional and government-insured mobile home financing. The loans backed by the FHA, VA, and USDA are offered by approved lenders. (VA and USDA loans may also be issued directly by those agencies.)
The most common method of financing is an installment contract through the retailer. Depending on your situation, a personal loan or chattel loan could provide a shorter-term path to financing a manufactured home, generally less expensive than other types of detached homes.
Pros and Cons of Buying a Manufactured Home
|The entire home is built off-site, so no weather delays||Financing may be more challenging|
|More affordable than other detached homes||Lot fees may be high and rising|
|May be able to move the home from one site to another||May have a reputation for shoddy construction based on older “mobile” homes|
Most people tend to think of a cabin as a cozy second home that’s made of logs or covered in cedar shakes. But there’s no reason a cabin can’t be your primary residence, especially if you don’t have to commute to work every day.
Just as with any other type of property, the price of a cabin can vary based on size, age, location, and amenities. If there’s an HOA, those fees can add to the cost.
The financing for buying a vacation home — aka a second home — and buying an investment property differ. Loans for second homes have the same rates as primary homes. A 20% down payment is typical.
Pros and Cons of Buying a Cabin
|You’re buying your very own getaway||A second home could mean two loan payments and two sets of bills|
|Or a rental property||Might have to do repairs when you’re on vacation|
|Could become your primary home in the future, or a legacy for future generations||Maintenance can get expensive|
10. Multi-Family Homes
Investors know the difference between single-family vs. multi-family homes.
For owners, the big advantage of a multi-family home is that it offers flexibility. Homeowners can buy a home with multiple units and rent out the spaces for extra income. Or an adult child or parent might decide to move into that secondary space.
These properties can be a good investment.
Do accessory dwelling units constitute multi-family? It depends. Fannie Mae says a property may be classified as a two-unit property or single family with ADU based on the characteristics of the property.
Pros and Cons of Buying a Multi-family Home
|Can share costs with others (renters or family members)||May be more expensive than a single-family home|
|Keeps multigenerational family members close but gives them their own space||Managing renters could be stressful|
|Can be a good investment||Lack of privacy|
11. Houseboat or Floating Home
Living in a home that’s actually on the water — not just near it — can be a dream come true … or a challenge.
Some “floating homes” are as big as a small house — and are built to be lived in the same way — only on a floating foundation. Houseboats or liveaboards are typically much smaller than floating homes and more mobile, and they may not have the amenities a larger home can offer.
There are also substantial differences in what it can cost to buy and maintain these water residences. A floating home may cost much more upfront than a houseboat, but the insurance, taxes, and day-to-day costs of keeping a houseboat operating can run higher. And there may be more loan options available, including traditional mortgages, for those buying a floating home.
Comparing House Types
Whether you’re thinking about buying a single-family home, condo, tiny home, houseboat, or townhome, it’s important to keep your priorities in mind. Here are a few things to consider:
Finding Your Fit
|If privacy is a priority, you might consider a …||
• Single-family detached home
• Tiny home (on a large lot)
• Modular or manufactured home
|If space is a priority, you might consider a …||
• Single-family detached home with an open floor plan
• Larger condo, townhome, or co-op
• Larger floating home
|If affordability is a priority, you might consider a …||
• Smaller single-family home
• Condo, co-op, or townhome
• Tiny house
• Modular or manufactured home
|If a sense of community is a priority, you might consider a …||
• Single-family home with community amenities
• Condo, co-op, or townhome
• Floating home or houseboat
• Multi-family home
|If uniqueness is a priority, you might consider a …||
• Tiny home
• Floating home or houseboat
|If schools are a priority, you might consider …||
• Any home in a neighborhood that’s conducive to families with young children
|If public transportation is a priority, you might consider a …||
• Condo, co-op, townhome, multi-family home, or single-family home in a larger town or city
Compare Mortgage Rates
Besides choosing the type of home you want, you’ll also have to decide how to finance this important purchase if you’re not paying cash. A good way to start is to shop and compare rates.
SoFi’s mortgage rates are competitive, and you can apply for a mortgage online in just a few minutes.
Photo credit: iStock/CatLane
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