Condo or Single-Family home? Which is better for me?

by Lori Symmes

In today’s real estate market, it is quite common to hear from first-time home buyers who have very specific requirements for a home. Many people have a vision of a new home with high ceilings, two or three bedrooms and three bathrooms. Townhomes and condominiums are being touted as the new solution to the affordability crisis, placing larger houses within the reach of more consumers. Indeed, for many people they are a good solution, but it depends on your needs, wants, and budget.

What makes Condo or Townhome living different from owning a Single-Family Home?

To begin with, you have full ownership of the space inside the unit, including the interior walls. You can paint, decorate, hang pictures, change flooring and otherwise customize your home. All the space outside your unit is shared among all the owners. You each pay Home Owner’s Association (HOA) dues to maintain everything. That typically includes all exterior maintenance to the building and the grounds. It includes all shared amenities such as grass, pools, parking, sidewalks and some you may not see and consider. Ones that aren’t so obvious include things in the walls and floors such as plumbing and heating systems. Because the actions of one home owner can impact others, management will need to inspect your home periodically. Things like leaky fixtures can damage multiple homes, so they’ll want to find and fix them before they can become an issue. 

How do I know if I can afford a condo or townhome?

HOA dues must be factored into determining what you can afford. With condimimum/townhome developments you can pay anywhere from $3,600 to $10,000 annually on top of your home loan in HOA dues. Lenders use your credit score to determine what percentage of your monthly income you can afford to spend on house payments. Buyers with excellent credit can qualify for up to 55% of their monthly income going toward their combined indebtedness. Combined indebtedness includes home loan, car payments, student loan payments, credit card payments and HOA dues. Many buyer’s credit ratings qualify them for a lower debt to income ratio, around 45%. This means the combined indebtedness payments, including their home loan and HOA dues, must not exceed 45%. 

If my combined indebtedness payments, home loan payments and HOA dues would exceed the percent I qualify for, is my dream of home ownership dead?

Not necessarily. The first thing to consider is your wish list. Do you need that additional bedroom or bathroom? Can you live with lower ceilings in order to own your own home? Is there another area you would be okay living in, even if it’s a longer commute? Being willing to compromise can help get you closer to owning the home that makes the most sense for you.

What is different about owning a Single-Family home instead of a Condo or Townhome?

There are tradeoffs to owning a single-family home over a condo, but they may be acceptable for you. For one thing, the whole home and land are yours and you won’t have shared walls. Maintenance issues are yours, for better or worse. If you’re a DIY-er, this may be a good fit for you. Otherwise, you will need to pay for services yourself that might be covered in a condominium/townhome development. It can be empowering to get to choose your own service providers, choosing what's important to you. HOAs are typically lower than in condominium/townhome developments, giving you room to spend on maintenance as you see fit. If you are open to older houses, they may not even have HOA dues at all!

So, which is better? A Condo or Single-Family home?

Every home buyer is different. For home buyers who don’t feel they have the time or skills to maintain a single-family property, the convenience of having the outdoor maintenance handled is worth the money. Many people also enjoy community amenities that may be included, such as pools, exercise facilities and dog parks. Some homeowners thrive on the more independent lifestyle that may be reflected in single-family homeownership.

So which is right for you? Could you see yourself as a condo or townhome owner, or are you more interested in owning a single-family home? As we’ve seen, these types of properties come with their own pros and cons. Ultimately, it is your budget, wish list, and how you imagine living your life in your new home that will help decide which is best for you. Historically, purchasing either type of home has meant opportunity to gain equity. That usually makes home ownership a good investment over time.

This blog post was written by Lori Symmes, a REALTOR in Northern Colorado.

Everything presented here is friendly advice. Nothing here is to be considered legal advice.