What Type of Home Should You Buy?

Multifamily Homes

A multifamily home is a part of a building that has more than one unit, accommodating two or more families. Every individual unit has a separate entrance, with its own address, utility meter, kitchen, and bathroom. Multifamily homes can come in the form of two-, three- or four-storied buildings. High-rise apartments typically fall under this bracket.

The pros and cons of buying a multifamily home depend on whether you plan to live in the home you purchase or use it as an investment.

Pros as a Residence

• Probable savings in overall maintenance costs.
• A lower cost of living lets you use your money for other purposes.
• Good option for people who wish to live close to family while retaining privacy.
• They typically provide better security than single-family homes.

Cons as a Residence

• Neighbors live in close proximity.
• Share walls and common spaces with neighbors.
• Need to follow rules for renovation.
• Need to follow coexistence rules.

Pros as an Investment Property

• Multiple rental units can generate reliable and consistent cash flow.
• You might have an opportunity for tax savings (which you should discuss with your financial consultant).

Cons as an Investment Property

• New investors may find the upfront cost to be expensive.
• You might need to hire a property manager if you own multiple properties.
• You may have to pay high insurance rates and property taxes.

New Construction Homes

Data released by the United States Census Bureau indicates that homebuyers purchased around 683,000 new construction homes in 2024, up 2.5% from 666,000 in 2023. Their median sale price in December 2024 stood at $427,000, putting them in line with single-family homes on the affordability front. While buying a new construction home might not appear at the forefront of your options, it can come with multiple benefits.

Pros

• Good option in hot markets where pre-existing properties are sparse.
• You may benefit from incentives offered by builders.
• It might be possible to customize your home while its construction is underway.
• New construction homes tend to come with energy-efficient design, lighting, and fixtures.
• Your home might come with a warranty.
• You’ll spend less on maintenance during the initial years.
• These homes follow the latest building codes and regulations.
• If it is part of a community, you may look forward to a swimming pool, gym, and other amenities.

Cons

• A new construction home might cost more than a comparable pre-existing home.
• You may need to wait for the construction to complete.
• The landscaping might not be up to the mark in the beginning.
• The neighborhood may seem empty at the start.
• You might need to pay higher property taxes than for a pre-existing home.

Condos

A condominium or condo is a part of a multi-unit building or property that typically has shared amenities like swimming pools, gyms, clubhouses, dog-walking areas, walkways, driveways, and parking lots. Is it a good idea to live in a condo? Well, it can be, especially if you want to keep the hassles of home maintenance to a minimum and don’t mind using shared services. This is because a homeowners association (HOA) is responsible for maintaining the outside of properties and shared areas, which it does by charging residents a monthly fee.

Pros

• Condos are typically more affordable than single-family homes.
• You benefit from using different shared amenities.
• You may find opportunities for socializing and can get a sense of community living.
• Several condominium associations hire security firms and implement different measures for heightened safety.

Cons

• You’ll need to pay HOA fees that may vary from a few hundred to over a thousand dollars each month.
• You will need to follow your condominium association’s rules.
• You don’t own the land your home sits on; instead, you own the home and share a nonexclusive interest in the community property which the condominium management controls.
• You might find fewer buyers if you wish to sell because many homebuyers steer clear of condos.

Townhouses

One key difference in the townhouse vs. condo comparison is that condos share walls with adjoining units, making them less private. Given that a townhouse is part of a multi-unit property, it tends to look very similar to the ones that surround it, and it might come with a front yard, backyard, and garage. A townhouse can have two or more floors.

In addition, while HOAs are responsible for many such multi-unit properties, owners are typically responsible for maintaining the inside and outside of their properties. Like owners of condos, townhouse owners may get to enjoy various shared amenities like gyms, swimming pools, and dog-walking areas. HOA fees are part of the parcel.

Pros

• Townhouses are usually more affordable to buy than single-family homes.
• You get access to various amenities.
• You own all the land that comes with a townhouse.
• An HOA is responsible for providing security.
• You pay lower property taxes than a single-family homeowner.

Cons

• Shared walls result in less privacy than single-family homes.
• You need to follow HOA rules.
• You might have to do with a limited piece of vacant land.
• The more the number of floors, the more stairs you need to climb, which is important to consider if you are elderly or have a disability.

Co-Op

While co-ops share similarities with condos, there is one key difference. When you buy a condo, you own the unit you purchase and also hold an interest in the common areas. However, when it comes to a co-op, you don’t own the unit in which you reside, but own a share of the overall property. In addition, a co-op has a board of directors and not an HOA.

Residents in co-ops have proprietary leases that allow them to occupy the units in which they reside until they transfer or sell their shares. In addition, residents who own more shares might be entitled to larger living spaces than others.

Pros

• They serve as affordable alternatives in some large cities like New York and Washington D.C.
• All shareholders have a vote in the management of the building/complex.
• They can come with amenities like swimming pools, gyms, parks, play areas, tennis courts, and rooftop recreational areas.

Cons

• Co-ops are very stringent when it comes to the approval process, often requiring background checks, referrals, and extensive interviews.
• Co-op boards can turn down buyers for varied reasons, so selling might not be easy.
• You need to pay a monthly maintenance fee.
• You need to follow all co-op rules.
• They are not very common in many cities across the U.S.

Renting Apartments

If you look at the condo vs. apartment comparison, you notice that the main difference revolves around ownership. This is because you cannot buy an apartment and you need to pay monthly rent, either to a landlord or a property management company. Before you move in, you sign a lease that states how much the rent is and the duration of the agreement. Once the lease period ends, you might have the option to renew it, although you may expect an increase in rent.

Apartment residents don’t need to pay HOA fees, and they are not responsible for the maintenance and repairs of their units or the common areas. Since there is no buying involved, there is no need to get a mortgage.

Common reasons people choose to live on rent in apartments include proximity to their workplaces, flexible leasing options, access to shared amenities, and testing neighborhoods in which they might buy homes later. The rising prices of real estate also drive many toward renting apartments.

If you find this alternative interesting, you might want to determine if you’re better off as a renter or a homeowner first. For example, if you plan to live in a neighborhood or a city for less than five years, renting might be the better option for you. This is also the case if you’re finding it hard to save enough money for a down payment without breaking your back.

Pros

• Renting is typically more affordable than buying.
• You get access to all shared amenities.
• You have the flexibility to move out.
• You don’t have to worry about maintenance at all.
• Renters insurance is cheaper than homeowner’s insurance.

Cons

• You don’t get to build any equity.
• You need to follow the landlord’s rules.
• You cannot make changes (like fixtures and paint) without asking the landlord.
• The rent can increase upon the renewal of the lease.
• You might need to vacate at a short notice.

Getting a Mortgage

The type of mortgage you may get depends on the type of house you buy and the eligibility criteria you meet. Whether you wish to buy a single-family home, multifamily home, new construction home, townhouse, or condo, you may think about applying for a conventional mortgage. However, if you plan to purchase a home that’s part of an HOA, you may expect a lender to seek additional information in the form of questions about the project, its insurance, and the number of owner- vs. tenant-occupied units.

Depending on the type of home you wish to buy, you may also consider getting these mortgages, although you need to meet their specific eligibility criteria.

• USDA loans. Backed by the United States Department of Agriculture (USDA), USDA loans come with a no down payment requirement.
• VA loans. Backed by the United States Department of Agriculture (USDA), you may apply for a VA loan as a veteran or a veteran’s spouse.
• FHA loans. The Federal Housing Administration (FHA) backs these loans. While you may get an FHA loan for an FHA-approved condo project, you cannot get one for a co-op.

Conclusion

Having gone through the alternatives, you should have some indication of which is the best type of house to buy for you. No matter which option you select, keep in mind that qualifying for a suitable mortgage is a crucial step toward homeownership. As a result, getting pre-approval from a reputable mortgage provider ahead of time is ideal as it gives you a clear picture of where you stand.