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Buy House, Condo or Townhouse As 1st Home?

When it’s time to buy your first home, you may face a choice: Should you get a single-family house, a condominium or a town house?

Besides price and affordability, there are other factors you need to consider to help you make a decision. Here are some questions to ask when deciding which type of residence would be best for your first home.

Does the location fit your lifestyle?

For young professionals who want to be close to the action, a short walk to restaurants, shops and a train station is likely a higher priority than having more bedrooms and a big yard.

A newlywed couple in a large metro area might be happy buying a condo or town house, but when their family starts to grow, a single-family house with a yard is a better fit.

If you work a lot, you may not want to spend your time off mowing grass or clipping hedges. Your lifestyle would be more compatible with a town house or condo where the homeowners association, or HOA, hires contractors to mow the lawn, clean the pool and do other upkeep.

“Those with many other responsibilities may not have time for home maintenance,” says Jordan Clarke, a real estate agent in Carlsbad, California. “Condos are also a convenient option for people who travel a lot.”

How much money, time and talent do you have for maintenance?

First-time homebuyers may not have the confidence or experience to take on the upkeep of a single-family home.

A condo or town house can be a good fit for new homebuyers because HOA fees, which are paid by all the owners, pay for maintenance and repairs in all common areas. Sharing costs is often easier for first-time homebuyers, especially for major repairs.

Owners of single-family homes, however, bear the entire cost of all repairs. If you need a new roof, for example, the entire bill is yours. But in a condo, the cost would be divided evenly among all the owners.

On the other hand, if you have a stand-alone house, it’s up to you to patch the roof, trim the trees and mend the fence – or else find the right people to do it for you, and that alone can be daunting for first-time buyers.

Can you live with the rules and quirks of an HOA?

Owning a condo or town house is not for everyone. There are rules to abide by in an HOA that some people may find too restrictive.

  • HOAs can tell residents where to park, what type of vehicle they can have on the property, ban them from grilling on their balconies or swimming in the pool after dark. They can also limit guest stays and enforce a host of other rules.

  • Neighbors are close by, and they can be annoying, especially ones who don’t follow the rules.

Does an HOA fit your finances?

Besides the rules and restrictions of an HOA, there are other considerations if you’re looking to buy a condo or town house.

  • If all the owners don’t pay their HOA fees or assessments, you may be required to fork over more than your fair share — and hope you’ll be reimbursed later.

  • Lenders usually charge higher interest rates for condo and townhome purchases than they do for single-family homes, says Jeremy Schachter, branch manager for Pinnacle Capital Mortgage in Phoenix.

  • When a buyer makes a down payment of less than 20 percent, the lender often subjects the HOA to a “full review” of its finances, Schachter says. A down payment of 20 percent or more triggers a limited review.

  • “You are significantly more tied in value to your neighbors when it comes to condos and townhomes,” Clarke says.

  • Big special assessments can hurt your budget. “If the condo building needs to do any major repairs that cannot be covered by the reserve fund, they will charge each owner a special assessment” on top of regular monthly fees, says Candy Miles-Crocker, a Realtor who trains other real estate agents and associate broker for Long & Foster Real Estate in Washington, D.C.

Miles-Crocker says she counsels her buyers that the money they pay for condo fees is not tax-deductible and could be put toward a mortgage. “Oftentimes, because of the condo fee, buyers can afford more house if they go the single-family route,” she says.

Buying a home, however, regardless of the type, comes with costs that don’t include the mortgage and taxes. “The difference being that the single-family homeowner is not paying a monthly condo fee on top of the large repair bill,” Miles-Crocker says.

Lamberg, Erica. "Buy house, condo or town house as 1st home?" Bankrate. 20 February 2018.


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