Condos vs. houses: A guide for first time home buyers

The two main types of homes you’ll see during your search are single family houses and condominiums (or condos). 

A single family house is what you might imagine on a leafy suburban street: it has its own lot and usually doesn’t touch other houses on either side. Everything inside and outside the house and on the lot is the responsibility of the house owner. 

A condo is likely to look more like an apartment building, with multiple individually-owned units under the same roof. They are a denser form of housing, so it makes sense that you’ll find them more in urban areas. Condo owners have full control over everything inside their home, but the outside and common areas are owned and maintained by a Homeowners’ Association. (You may also encounter townhouses, which have an ownership structure similar to condos but look like semi-detached houses.)

The differences between houses and condos are not just aesthetic. Aside from curb appeal, which type of home you buy will have an impact on your finances and lifestyle. In general, single family homes are more expensive than condos. 

1. Space. Even the smallest lot for a stand-alone house has outdoor space that is not included with condo ownership. Houses also tend to have more square footage inside, raising the price and value of the home. 

2. Taxes. Property taxes are based on the value of your property, so house owners will likely pay more in property taxes than condo owners. 

3. Insurance. Insurance is another area where houses cost more. House insurance covers more than condo insurance: the house’s land, plus the interior and exterior of the home. Condo owners, on the other hand, only have to pay insurance on the inside of their individual unit. Insurance on the rest of the building and the outside and common areas is paid for indirectly, by the Homeowners’ Association (HOA). 

4. Maintenance. The HOA also gives condo owners the edge when it comes to maintenance costs. Monthly HOA fees include maintenance on the building’s exterior and shared areas, as well as any major necessary improvements such as a new roof or heating system. Large one-time repair costs may strain the finances of house owners, while condo owners have smaller, more regular costs built in to their HOA fees. As far as individual responsibilities, smaller condo units are simply less expensive to maintain than larger houses. 

5. HOA fees. The perks of the HOA aren’t free. Condo owners can expect to pay monthly HOA fees that increase slowly over time for as long as they live in their home. These fees add hundreds of dollars to your monthly outlay, so don’t just look at the lower mortgage payment on a condo compared with a house. 

Buying a house is expensive, but buying a condo has its own challenges. Mortgages for condos are more complicated than for standalone houses, so getting financing (especially with an FHA loan) can be more challenging. If you want to get the best rates when buying a condo, be ready with 25% of the purchase price as a down payment, versus the standard 20% or less for a house.

Choosing a home to buy is an emotional decision as much as it is a financial one. Condos and houses offer totally different living experiences, which you should consider before diving in. 

• Privacy. If you like the sense of community that comes with seeing your neighbors at HOA meetings and BBQs, a condo might be a good choice. Being in close proximity to other people may feel safer for young people and old people who live alone. On the other hand, many people value the privacy that comes with a detached house, where you don’t have to share walls with nosy or noisy neighbors.

• Upkeep. Aside from the actual costs of upkeep and repairs which we covered earlier, maintaining a home is time-consuming. Condo owners don’t have to worry about exterior maintenance at all, because it is all taken care of by the HOA. No calling around to get quotes for landscaping, no waiting for someone to come clean out the gutters. House owners, on the other hand, are responsible for everything that concerns their home and land. This is either a benefit or a drawback, depending how handy you are or how much pride you take in mowing the lawn. 

• HOA obligations. HOA rules are necessary for maintaining order in condo complexes, but you may not agree with all of them. Rules range from how to decorate the outside of your unit to what kind of pets you can have. House owners have total control over how their home looks and what they do in it, but they pay more for the privilege.

• Amenities. Condos often feature luxury amenities like swimming pools or tennis courts that many single family homes don’t have. Condo owners pay for these through their HOA fees. If you use them, amenities can be a convenient perk, but you do have to pay for them even if you don’t use them. 

• Resale Value. House prices are dependent on the larger housing market, while condo prices are more dependent on prices of other units within the complex. For this reason, condo prices tend to be more stable, without the potential highs and lows of the broader market. House owners have more opportunity to make improvements and potentially make more profit on the sale of their home.

Home ownership can be a great investment as long as you’ve done your research and know exactly what you’re getting with the type of home you’re buying. If you are a first-time homebuyer, a condo can be a less expensive way to get into real estate, with lots of amenities and without some of the hassles that come with maintaining a single family home. If you have a bigger budget, want to have control over every aspect of your new home, and are excited for the responsibilities that it brings, a house could be the right fit for you.

Both condos and houses can be quite expensive—especially in cities. Saving to buy one takes diligent personal budgeting. If saving for a condo or house is one of your goals, opting for an affordable rental while you save can help you get there. Bungalow offers private rooms in shared homes that are less expensive than living alone. Find a Bungalow near you.