First-time homebuyers have a lot to consider before purchasing a property. The first thing to understand is the different types of properties. You might think a house is just a house, right? In fact, there is a big difference between a single-family home, townhome, condo, and mobile home. It’s important to understand the differences to comprehend what types of financing you will need and what other costs to consider besides the purchase price.

Financing has become more expensive because interest rates have risen in recent years. This makes it harder to borrow money and limits the amount you can borrow. According to Freddie Mac, as of May 30, 2024, the fixed 30-year mortgage rate is 7.03%, and the fixed 15-year mortgage rate is 6.36%. These interest rates can limit the pre-approval amount a first-time homebuyer can obtain.

Let's delve into the most common types of properties you’ll find when starting your property search on the Multiple Listing Service (MLS).

Mobile Home

Many are tempted to start their real estate investment with a mobile home. In reality, a mobile home is not real estate. It is considered personal property, like a car. Buying a mobile home does not include the land where it is located, and the owner has to pay rent for the land to access basic services. Mortgage lenders do not consider mobile homes as real estate and therefore do not offer loans for this type of property.

Townhome

A townhome is real estate. It is a multi-story home attached by at least one wall to other similar properties. When you buy a townhome, you own the property it sits on, including the front and back yards, and the interior and exterior property. Townhomes tend to have a Homeowners Association (HOA). The HOA has declarations and regulations to ensure the neighborhood follows certain rules, from property appearance to pets and noise. HOA fees are mandatory and cover management fees, services, and, in some cases, part of the maintenance.

Condominium (Condo)

A condominium is also real estate. A condominium (or condo) is a single property within a larger building that usually has 1 to 2 floors. However, the biggest difference is that when you buy a condo, you only own the property within the walls. Common areas are owned by a different entity, or jointly by condo owners, and are used and shared by all condo owners. Condos also have an HOA with regulations that could include restrictions on short-term rentals, pets, and more. HOA fees are mandatory.

Single-Family Home

As the name suggests, this is a unique, independent property located on land. When you buy a single-family home, you own the property inside, outside, and all the land it sits on. Single-family homes can be the most expensive option on the market, as they offer homeowners the most freedom in their property. In some cases, neighborhoods also have to follow a Homeowners Association, but not always.

How to Decide Which Type of Property Is Best for You?

My recommendation is to avoid mobile homes and stick with real estate properties, as they have proven to be better long-term investments. It’s also important to remember that your first home is not necessarily your forever home. Over time, your property will gain more value that you can use in the future to buy your dream home.