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A condo is a privately owned unit in a community of other units, often with shared areas or amenities. If you’re considering whether to buy or rent a condo, you’ll want to think about the costs, benefits, and responsibilities of each option.

Of course, those who are deciding whether or not to rent have much less riding on their choice, but it’s still worth delving into the pros and cons of this kind of property and if it suits your needs.

Here, you’ll learn about the characteristics that define condos, the pros and cons of these units, and what it’s like to rent or buy a condo.

What Is a Condo?

As noted above, a condo is a privately owned unit that is part of a community of other units, whether that means there are a couple of other residences or dozens. Typically, a condo owner only possesses their unit, unlike the situation with a single-family homeowner, who owns the home and the land under it.

You may be familiar with condos that are rented out for income. If you’ve ever rented an apartment in, say, a complex by the beach, with a shared pool and patio, there’s a chance you’ve been in a condo. Real estate investors often buy condos and rent them out in this way.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Characteristics of a Condo

Individual condo units are owned by private owners, while common areas are owned and maintained by an association or organization. This might be called a condo association (CA) or a homeowners association (HOA). These groups are not identical, but they do manage a multi-unit residential community.

Your ownership rights may be limited to the space within your condominium, as is the case with most condo high-rises, or you may own an entire standalone structure within a larger community. In a condo situation, the CA or HOA owns the land. In a planned unit development, the homeowners own their lot and share the common area.

Maintenance and Finances of Condos

Condos are popular starter homes, thanks to their low maintenance, relatively cheap purchase price, and general convenience. They may also appeal to investors and people who are downsizing.

With detached single-family homes, you’re on the hook for the bill if any repair issues arise, whether it’s a broken water heater, leaky roof, or malfunctioning air conditioner. This generally isn’t the case with condos, as the property management company employed by the CA or HOA maintains common areas and shared amenities.

Convenience comes with a price, though. Condo owners share maintenance costs, and the expense of a master insurance policy, by paying dues monthly or quarterly. It’s important to budget for these costs. HOA fees,for example, have recently been rising 10% per year. Atop those fees, special assessments can be levied if the HOA needs to pay for a major project.

Condos tend to appreciate at a slower rate than traditional single-family homes, but they cost less. So buyers may want to take both realities into consideration when deciding on house vs. condo.

Recommended: First-Time Homebuyers Guide

Types of Condos

Condos vary widely in structure and appearance, ranging from high-rise buildings to communal developments. Take a closer look:

Condo Developments

These are communities of standalone homes where maintenance of both the interior and exterior are carried by the condo owner, but services like the maintenance of common areas and snow removal are typically handled by a property management company.

All properties within a condo development are bound by the rules of the CA or HOA, so it’s similar to a traditional neighborhood with fixed rules and less upkeep.

Condo Buildings

These are high-rise apartments consisting of individual condo units. The maintenance of the structure, shared utilities, and common areas are the responsibility of the property management company.

If you’re looking at buying or renting an apartment in a large metropolitan area, make sure you understand what it means to choose between a condo and a co-op.

High-rise condo buildings are more common in urban areas and may have higher fees in order to cover the greater costs of maintaining an apartment building and often the salaries of full-time maintenance staff members and doormen.

Pros and Cons of Condos

Next, take a look at the pros and cons of a condo.

Pros of Condos

Here are the upsides of condo life:

•   Less maintenance since the CA or HOA is responsible for many aspects of upkeep.

•   Affordability. Since you don’t own the land, the price can be lower.

•   Possible investment opportunity; can use a condo for rental income.

•   Security. Some people appreciate having a condo staff and neighbors nearby.

•   Social life. You’re part of a community and will likely know and connect with your neighbors to some extent.

•   Amenities. There are often such features as gyms, pools, dog run, coworking space, party rooms, and other perks to enjoy.

Cons of Condos

Next, consider the potential downsides of a condo:

•   Association rules. You have to adhere to the guidelines of the community, which may or may not suit you. This can include everything from the appearance of your home’s exterior to when and for how long you may rent your place out.

•   Higher interest rates. If you are shopping for a condo to purchase, you may find that the mortgage rates are somewhat higher than what you’d be quoted if you were buying a single-family home.

•   Investment risk factor. If you are buying a condo, its value could depend to some extent on other residents and how well they maintain their property.

•   Lack of privacy and land. You will have neighbors…so the experience is different from being in your own single-family home on your own land. And you likely won’t have acres of property to plant and use as you wish.

•   Rising costs. Your association payments can rise considerably, and assessments are possible as well. That can throw a wrench in your budget.

Recommended: Most Affordable Places to Live in the US

Buying or Renting a Condo: Which Is Better?

Whether you’re better off buying or renting a condo — or any of the other types of houses, from modular home to manufactured home, tiny house to townhouse — depends as much as your own circumstances as it does the cost of buying vs. renting in an area.

•   Buying: Assuming you’ve decided to settle down in an area for the next three to five years, you might be better off buying a condo if you have a stable income stream and can cover the down payment and closing costs without emptying your emergency fund.

Given how real estate values have risen in the past few years, buying a condo may be a good choice if you’re looking for long-term investment and a chance to build home equity over time.

•   Renting: You may be better off renting if there’s a chance you’ll need to relocate within the next few years, or if any upcoming life events might require you to upsize your residence, like having children.

Here’s a closer look at these scenarios.

Pros of Renting a Condo

Renting a condo gives you all of the benefits of living in a private condo unit without the long-term commitment and upfront costs.

•   Few maintenance responsibilities: If you’re renting a condo unit in an apartment building, the association is responsible for maintenance, or in the case of an individually owned HVAC system, the owner is.

•   More leeway for negotiation: Reliable renters are hard to come by; some condo owners may be more willing to negotiate your monthly rent than professional property managers are.

•   Flexibility to end or extend your lease: As a renter, you can often decide whether to end or continue your lease. This makes it easy to cut ties if needed.

Pros of Buying a Condo

Taking out a mortgage to buy a condo more or less freezes your living costs into the future. This will help you avoid rising rents, though association fees can certainly rise.

•   More affordable than single-family homes: The price of a condo is usually lower than a single-family home in a given area. This makes it attractive to homebuyers on a budget.

•   Freedom to make it your own: Owning a condo gives you more freedom over such features as the appliances and color palette than you’d likely have with a rental.

•   Rental potential: Depending on the rules of your association, you may have the right to rent out your condo to generate income.

Finding a Condo

If you’re ready to go out and shop for a condo, you’ll want to assemble a list of must-haves to narrow your search. This applies whether you’re looking to rent or buy.

Are you looking for a more affordable apartment condo or something with more space like a community development? Browse local listings for condo units that match your requirements.

For those seeking to buy a condo, it’s a good idea to find a real estate agent who’s well versed in condo sales. They know the area and can obtain vital info regarding association rules and financials. It’s important to review the rules and fees, and check for any special assessments and their frequency over the years.

Condo Tips

A few more suggestions as you start your hunt:

•   If you are planning to buy, it’s also a good idea to thoroughly understand mortgage basics and have financing lined up with a mortgage company so you’re ready to make a bid on a property.

•   Know your budget. A mortgage calculator is an excellent tool for helping you figure out your costs.

•   Consider checking this HUD site for FHA-approved condos as your primary residence if you are seeking financing with an FHA loan.

💡 Quick Tip: Keep in mind that FHA home loans are available for your primary residence only. Investment properties and vacation homes are not eligible.1

The Takeaway

What is a condo? A condo is a privately owned unit within a community that can be a good starter home or a place to downsize. Or it might be a wise investment property that can bring in rental income. If you’re able to rent a condo, it’s much like renting an apartment, except your landlord may be the owner.

If you’re interested in buying a condo, realize that condo buyers are able to access the same kinds of loans available to buyers of single-family homes, though rates may be slightly higher.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What’s the difference between an apartment and a condo?

A condo can be a kind of apartment, which is a residential unit that’s part of a larger building. An apartment can be owned or rented, as can a condo. However, a condo is a specific kind of unit ownership in which there are communal facilities and shared maintenance charges.

What is the difference between a condo and a townhouse?

With a condo, you own your unit but not the land under and around it. You pay for your unit (rent or mortgage). Association charges cover maintenance and repairs, and property taxes apply to owners. With a townhouse, the property includes the residence and the land it sits on and that surrounds it. You will pay your rent or mortgage and real estate taxes, but may not be part of an association or obligated to pay those fees.

Is a condo the same as a flat?

Many people use the terms condo, apartment, and flat interchangeably. While an apartment and a flat are the same thing, a condo refers to a style of ownership of a dwelling unit that’s part of a community. It may be an apartment, but the way it’s bought or rented can differ.

Photo Credit: iStock/Edwin Tan

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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No matter which side of the home buying process you’re on, it’s important to understand all the real estate terms and documents you’ll come across.

While you may be familiar with mortgages and contracts, one document that tends to be greeted with uncertainty is the house deed.

What is a house deed? Does it prove that you own your house? This guide will explain what a house deed is, why you may need one, and the role it plays in the home buying and selling process.

What Is a House Deed and Why Do I Need One?

A house deed, sometimes referred to as a property deed, is a written and signed legal document used to transfer ownership of real property. Real property is land and any property attached directly to it, like a house.

In other words, a house deed is very important to the buying and selling process.

In fact, a home transaction can’t take place without a deed. It’s one of the things you need to buy a house. Both the buyer and seller of a property must sign the document for a transfer of ownership to take place. Every state requires that this be done in front of a notary and, in some states, before other signature witnesses as well.

Is a House Deed Different From a Title?

Though the two terms are often used interchangeably, a house deed and a title are very different.

It’s often assumed that a title refers to a document, but it’s actually more of a concept referring to your legal ownership of a home. A title grants you ownership rights, including possession, control, exclusion, enjoyment, and disposition.

Put simply, a title refers to your ownership of the property, your ability to use your property as you please, to choose who enters your property, to enjoy your property as you see fit, and to decide when and to whom you transfer ownership of your property to.

But because you can’t transfer a concept, a physical document is needed to symbolize and confirm a change in ownership. This is where a house deed comes into play. Closings can take time, but without a deed they can’t happen at all.

What Is On a House Deed?

Deed requirements vary by state. But generally speaking, a house deed should include:

•   Description of the attached property.
•   Details of the grantors (sellers).
•   Details of the grantees (buyers).

Once all parties are in agreement, a deed should also include the signatures of both grantors and grantees. The deed must then be delivered to the grantee by handing the document over and accepted.

Recommended: How to Get a Mortgage in 2023

Types of House Deeds

There are different types of house deeds to be aware of. They offer different benefits, and even a few risks, to buyers and sellers.

Here’s what you need to know about the most common types.

General Warranty Deed

A general warranty deed is designed to offer premium protection to the grantee (buyer). This type of deed involves the grantor (seller) making covenants, or a series of legally binding promises, to the grantee.

Such promises could include what’s called the covenant of seisin. This covenant guarantees that the grantor is allowed by law to transfer the property in question. Another is the covenant of quiet enjoyment, which guarantees that the new owner will not be disturbed on their property, even if the grantor had a defective title, such as a previous lien or judgment.

Quitclaim Deed

Unlike a general warranty deed, a quitclaim deed is designed to offer maximum protection to the seller.

Also known as a non-warranty deed, this type of deed does not include covenants for the buyer. Should the seller unknowingly have a defective title, the buyer will have no legal recourse should the deed be challenged.

Special Purpose Deeds

Though not as common as a general warranty or quitclaim deeds, there are several types of special purpose deeds you may come across, especially if a seller has someone acting on their behalf.

Similar to quitclaim deeds, there is often little protection for the buyer but in some situations, a special purpose deed is the only legal option. Special purpose deeds include:

•  Gift Deed. A gift deed is used to convey a real property title that is given for no consideration, or without money exchanging hands. In some states, there is a time limit to record a gift deed or it becomes void. And despite money not being exchanged, transfer, records, and/or gift taxes are sometimes still required.
•  Tax Deed. If a property has fallen to delinquent taxes, a tax deed will be issued for the property transfer.
•  Administrator’s Deed. If the seller passes away without a will, an administrator’s deed may be used by the appointed administrator of the estate.
•  Executor’s Deed. If a seller passes with a will, an executor’s deed may be used by the estate’s executor to transfer the property.
•  Sheriff’s Deed. When property is seized by public office, an execution sale often takes place. A sheriff’s deed is then provided to the winning bidder to complete the transfer.

Obtaining or Transferring a House Deed

As a buyer, you’re not responsible for tracking down a house deed (though it is a critical factor in your house-buying timeline). But if you’re selling or taking out a second mortgage on your home, you’ll have to locate the document before moving forward.

Luckily, you can track down a house deed with just a few simple steps.

1. Determine your jurisdiction. A search for a house deed should always start by confirming your county recorder’s website .
2. Search the database. Once you’ve found the correct database according to the location of your property, search for the record of your house deed. You may need your property index number, but the address of your home may be enough to track it down.
3. Conduct an accuracy check. Assuming you find a record of your house deed, take a few minutes to ensure that it’s accurate. If you do spot an error, call the recorder’s office to determine how the issue can be resolved.
4. Request a copy. If everything with your house deed is accurate, you can request a copy from the recorder. You may need to submit proof of your identity or pay a fee for both the copy and certification. But once you’ve met all the criteria of the office, you’ll have a physical copy of your house deed.

If you’re struggling to track down your house deed, you always have the option of hiring a third party to handle the process for you.

Once you have the deed, you can start the transfer process. Because this is necessary in every home-buying transaction, your real estate agent should be able to walk you through the following steps.

1. Prepare the deed. Even if you’re not using a real estate agent, it’s a good idea to hire a real estate attorney to prepare the deed. An honest mistake on your part could void the transfer or lead to serious legal issues down the road.
2. Review the deed. Both parties should review the deed for any inaccuracies. This includes full legal names, addresses, and the description of property. No one should sign until both parties verify all information.
3. Sign the deed. Both parties need to sign in front of a notary. Check with your state law to see if other witnesses are required .
4. Record the deed. A signed deed should be presented to the local county recorder’s office where it will be filed and stored in their database. Be prepared to pay any associated fees and taxes at this point.

Recommended: Guide to Buying, Selling, and Updating Your Home

Knowledge is Power

Though legal requirements can vary, and different house deeds provide unique protections for sellers and buyers, a house deed is generally one of the most important documents to know about in real estate.

If you feel confident in your understanding of the home-buying process and you’re ready to start your journey to home ownership, SoFi offers home mortgage loans with flexible terms, an online application, and mortgage loan officers who are available to guide you through the process. It takes just a few minutes to find out if you pre-qualify. Then you can choose the mortgage that’s right for you and your financial situation.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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If you’re in the market for a home, you may have come across the term “single-family home” and wondered what it means and if that is what you are looking to buy.

Generally, a single-family home refers to a freestanding home set on its own piece of property. It can be occupied by a single individual or a large family, as long as it’s occupied by a single household.

Owning a single family home comes with a number of benefits, including more privacy and space than other types of residential properties. However, this type of home also tends to come with a higher price tag and more responsibility. Here’s a closer look at what single family homes are and the pros and cons of buying one.

What Is a Single-Family Home?

Generally speaking, the term single-family home refers to a home that is designed for, occupied by, and maintained by one person or household. When you buy a single-family home, you will own both the home and the property it sits on. This is in contrast to other types of properties, such as condominiums (condos), where you only own the interior of your unit and share ownership of common areas with other homeowners in the complex.

In most cases, a single-family home is defined as one that is freestanding and not attached to homes owned by other individuals. However, the government has a broader definition. According to the U.S. Census Bureau, a single-family home includes fully detached homes, as well as semi-detached row houses and townhouses. In the case of attached units, the units must be separated by a ground-to-roof wall in order to be classified as a single-family structure. Also, these units must not share heating/air-conditioning systems or utilities.

In some places, a single-family home is defined in part by how many kitchens it has. Depending on zoning laws, adding a second full kitchen to an in-law’s apartment, for example, can cause a house to be redefined as a multi-family building. If you’re planning on doing this type of renovation, be sure to check local zoning laws beforehand.

Whether a home is classified as a single-family or multi-family home can have an impact on the type of mortgages you qualify for. Both single-family homes and two- to four-unit properties fall under residential lending guidelines. (A property with five or more units is considered commercial property.) You can use a conventional mortgage to purchase a home with four or fewer units, whether it’s a single- or multi-family home. If you’re buying a multi-family home with five or more units, you must use a commercial mortgage. Commercial mortgages have different terms than residential mortgages do.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Pros and Cons of a Single-Family Home

As you shop for homes, it’s important to consider the various advantages and disadvantages of a single-family residence.

Some of the advantages are:

•   More space Single-family homes tend to offer more space than other types of housing, and it belongs to you alone. They may have large yards where children and dogs can play or where you can plant a vegetable garden. They may also have storage in attics, garages, or basements, which aren’t shared between multiple units.

•   Privacy Single-family units that don’t share walls with neighbors offer more privacy. You are less likely to hear neighbors’ activities, and they are less likely to be bothered by yours.

•   More design features Single-family homes may be available in a broader range of designs and layouts, from Cape Cods or colonials to ranch homes and contemporary designs. You can also make changes to the building or landscape design without input from neighbors with a shared interest in the space.

•   Room to grow Single-family homes may offer you more options for additions if you have a growing family or if aging parents may come to live with you. For example, single family detached homes with larger plots of land may allow additions that wouldn’t be possible in condo units.

•   May offer higher appreciation Single-family homes tend to appreciate in value more than condos and townhouses.

•   Option to rent As the sole owner of a single-family home, you have the option to rent out the house if you decide to move and wish to hang on to the property.

While these factors are attractive, it’s important to weigh potential disadvantages of buying a single-family home as well. Here are some to keep in mind:

•   More expensive Single-family homes tend to be more expensive than other types of homes. That can mean a larger down payment and higher closing costs, and your mortgage payments may be higher.

•   More maintenance Unless your single-family home is part of a homeowner association (HOA) that provides basic services, you’ll be in charge of all home maintenance like lawn mowing and roof repairs. You’ll either have to take the time to do it yourself or hire help.

•   Possible HOA fees Planned developments usually require HOA fees to cover the upkeep of common areas and shared structures.

•   Less income potential With multi-family homes, you have the option to live in one unit while renting out the others. This allows you to bring in regular income to cover the cost of the mortgage and maintenance expenses.

Finding a Single-Family Home

Before you start looking for a single-family home, you’ll want to first determine how much home you can afford. You might start by calculating mortgage costs and getting prequalified for a home loan; prequalification often only takes a few minutes and provides an estimate of how much you might be able to borrow and at what rate (without impacting your credit).

You’re probably already searching real estate listings online and noting the property types. You might also want to do some research on housing market trends, especially if you live in one of the nation’s real estate hot spots.

You may also want to engage a real estate agent. They have expertise in local housing and zoning laws, know whether a list price is fair or above or below average, and can help you negotiate the price of a home you’re interested in buying.

If there’s any question about how a house is zoned, you can often look up zoning information through a particular city’s website.

Recommended: First-Time Home Buyer’s Guide

Who Should Get a Single-Family Home?

Single-family homes are a good fit for people who can cover the higher price tag, want privacy and flexibility, and are willing to take on a lot of responsibility.

If you qualify as a first-time homebuyer, there may be help available to buy a single-family home in the form of down payment assistance and low- or no-interest loans.

If you’re looking for a more affordable home and don’t mind giving up some privacy, you might want to consider a condo or townhouse.

A condo is like an apartment but is available for purchase. These units share walls with neighboring units, but you generally won’t have to worry about maintaining the property.

A townhouse, on the other hand, has multiple stories and will share one or two walls with other units. Like condos, townhouses are typically less expensive than single-family homes. Unlike a condo, you’ll own the property that the townhouse sits on.

If you’re looking to invest in real estate, you might consider buying a multi-family home. While this will likely cost more than a single-family home, you may be able to recoup the added cost (and, over time, earn even more) by collecting rent from tenants.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

If You’re Thinking of Purchasing a Single-Family Home, SoFi Home Loans Can Help

Single-family homes are one of the most popular real estate options and often what people envision when they think about achieving the dream of home ownership.

This type of property typically sits on a parcel of private property and doesn’t share walls with neighbors, affording you a high level of privacy. You generally have more control over making enhancements to your home than you have with other types of properties, and usually have access to extra storage, including exterior storage space like a shed or garage.

However, don’t forget to consider the added responsibilities and costs when deciding on the right type of home for you and your family.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much does a single-family home cost?

The median price for an existing single-family home — one that’s already standing, not new construction — was $387,600 as of November 2023, according to the National Association of Realtors.

How much do I need to build a single-family home?

The cost of building a single-family home (not including land) can range anywhere from $42,000 to $900,000-plus depending on the home’s type and size and where you build. On average, the cost to build a house in the U.S. is about $329,000.

Can you get a loan to build a single-family home?

If you’re planning to build a single-family home from scratch, you can apply for a construction loan. With this type of loan, money is usually advanced incrementally during construction, as the home-building project progresses. Typically, you only pay interest during the construction period. Once the construction is over, the loan amount becomes due, and it is converted into a regular mortgage.

Photo credit: iStock/Dean Mitchell

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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Modular homes are often misunderstood, but these homes are built to the standards of their site-built brethren, are typically more affordable, and go up faster.

Just like other homes, they may appreciate in value.

Read on to learn whether or not a modular home might tick all your boxes.

Characteristics of a Modular Home

Remember the Sears mail-order kit homes? The catalog, debuting in 1908, offered all the materials and blueprints to build a house. Sears had sold an estimated 75,000 kit houses by the time the catalog was discontinued in 1940.

They were prefabricated homes, meaning some or all of the home was built in a factory. The term still applies to modular, panelized, and manufactured homes. (Kit homes are still sold, and appeal to DIYers who don’t need a general contractor to handle everything.)

Modular homes are born almost entirely in a factory. Boxlike modules — complete with walls, floor, ceiling, wiring, light fixtures, cabinets, and HVAC system — are trucked to the homesite, lifted by crane, and put together.

Manufactured homes, formerly called mobile homes, also are built in a factory and meet a federal code, but modular homes must meet the same state and local building codes as stick-built homes. They’re permanently attached to a standard foundation and are real property.

Modular houses come in a huge variety of designs and styles, from accessory dwelling units, or ADUs, to three-bedroom homes with sleek, contemporary designs. Many companies offer a menu of layout options, and buyers may be able to customize features.

Recommended: Guide to Buying, Selling, and Updating Your Home

Pros and Cons of a Modular Home

Here are some upsides and downsides of modular construction.

Pros

Speed: A modular home or apartment building can go up in as little as half the time of similar site-built residential buildings, whose construction averages around 10 months, according to the U.S. Census Bureau’s most recent data. Or even faster: Some modular home factories can finish a house in a few months. The modules are built offsite while the foundation is being prepared. Weather delays are far less of a concern.

Cost: Modular homes are typically cheaper than stick-built homes. The climate-controlled factories are specialized, and production processes are streamlined.

Greener: Modular construction results in fewer carbon emissions than traditional building methods: It requires less transport of workers and materials and fewer carbon-intensive products like concrete and steel. Producing buildings in a factory setting promotes recycling and reuse. In addition, modular buildings can be designed to achieve LEED certification.

Homes may appreciate: A well-built modular home, like any stick-built home, will tend to appreciate. The value holds up better in communities where modular homes are not uncommon.

A way to ease the housing crisis: Urban cities are looking at prefab housing to mitigate the U.S. housing shortage, and prefab-housing startups have sprouted nationwide. MiTek, a startup owned by Warren Buffett’s Berkshire Hathaway is, it says, “making modular mainstream.” It plans to ship kits of manufactured building parts to be assembled by general contractors. President Joe Biden and Vice President Kamala Harris updated a plan to increase the housing supply in August 2023, pledging the construction of more than 2 million new homes. That plan included modular housing.

And a smarter way of doing business: PulteGroup, the country’s third-largest home construction company, is investing in offsite manufacturing of parts for a percentage of the homes the company builds each year. A lack of labor has been contractors’ biggest challenge. Modular construction can help a company do more with fewer workers.

Recommended: Home Affordability Calculator

Now for the not-so-great news.

Cons

Zoning hurdles: Modular builders face pushback from many cities, as offsite construction isn’t mainstream and each city has its own zoning laws.

Financing: If modular homebuyers can’t pay cash, many will have to finance the build with a construction-only or construction-to-permanent loan (aka one-time-close loan). The down payment on land and the home for a construction loan will often be up to 30%, unless it’s one of the government-backed loans described below. A modular-home buyer who already owns the land can use the land as equity and may be able to borrow all of the construction cost if they meet the criteria for the loan.

You and the contractor usually need to be approved for the loan. Money is disbursed based on a draw schedule. Payments are typically interest only and start out small.

With the construction-to-permanent loan, some lenders, for a fee, will let you lock in a fixed rate with a “float down” option if rates have fallen. If you choose a variable rate, you’ll pay the current rate when the mortgage converts.

A two-time-close loan is composed of a short-term loan for the construction phase and a permanent mortgage for the completed home. You’re essentially refinancing when your home is complete; you’ll need to be approved and pay closing costs again, but the rate could be better. In most cases you can compare other lenders’ offers to get the best rate and terms on the permanent mortgage.

An FHA One-Time Close Loan is a government-backed home loan program that applies for modular homes and the land. The minimum down payment is 3.5%.

A VA One-Time Close Loan allows eligible service members to finance modular construction, lot purchase, and permanent mortgage with no money down.

A personal loan, sometimes for up to $100,000, could fund part of the modular construction or the purchase of the land. Keep in mind that unsecured loan rates are higher than rates on secured loans.

Qualified homeowners may be able to use a home equity line of credit (HELOC), home equity loan, or cash-out refinance to give rise to their modular aspirations.

HOA blockage: Some homeowners associations may not allow modular construction in the neighborhood.

Contractor expertise: Unless you have construction chops yourself, you still have to find a contractor. You’ll also need to secure a piece of land if you don’t own the land already.

All the extras: Among the disadvantages of modular homes is the difficulty of determining the total price. Buyers pay not only for the home but also the land, foundation prep, and transportation.

Possibly a big upfront payment: A builder may want payment in full before construction begins.

Finding a Modular Home

You may want to search for “modular home companies by state” or “prefab homes by state.” Of course there are Facebook and Reddit modular discussions. Word of mouth is another avenue to find a modular home builder.

Some modular home manufacturers sell directly to homeowners, and others work through a network of retailers.

At least one modular company has developed factory relationships across the United States.

Keep in mind that this style of construction is still pretty rare, in this country at least. In 2022, only 26,000 U.S. homes were built offsite. That’s about 2% of all homes completed that year.

Who Should Get a Modular Home?

People who want a new home up and ready more quickly and less expensively than a stick-built home might be smart to think modular.

Environmentally conscious buyers might find modular construction a breath of fresh air. Folks who want a modern ADU or primary or vacation home might want to go modular.

People who appreciate efficiency and innovation might be drawn to modular construction.

It helps to already own the land. If you don’t, and this will not be a cash deal, it’s important to understand the pros and cons of construction loans and other financing options.

The Takeaway

Modular homes are faster to complete and less expensive than site-built homes, but perceptions and financing can be challenges. If you do plan to build even an ADU out back, check your local zoning, compare modular vs. stick-built construction, and know your terms (manufactured vs. modular, real property vs. personal property). It all can be confusing.

SoFi can lend a hand. Do you plan to use a construction-only loan and need a permanent mortgage after the build is done? SoFi offers mortgages with competitive rates and a variety of repayment terms.

SoFi also offers personal loans of $5,000 to $100,000, which could fund the land or more, and brokers a HELOC that may allow you to access up to 95% of your home equity to fund your modular vision.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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If you’re looking for a well-priced home and wouldn’t mind a fixer-upper, you might benefit from a HUD home, which is a property that was foreclosed on and is now being sold by the US Department of Housing and Urban Development.

HUD homes can offer affordable deals, especially to those buyers who don’t mind fixing up a property, and you might find lower down payments and help with closing costs in some cases. But HUD houses aren’t for everyone, so read on to learn the details and the pros and cons.

What Is the Department of Housing and Urban Development?

HUD was created in 1965 as part of President Lyndon B. Johnson’s war on poverty. Its current stated mission is “to create strong, sustainable, inclusive communities and quality affordable homes for all.”

HUD oversees mortgage insurance programs for lower- and moderate-income families; public housing, rental subsidy and voucher programs; and many others. In this way, it helps to improve deteriorating properties.

💡 Quick Tip: SoFi’s Lock and Look ⁺ feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

What Are HUD Homes?

Here’s the definition of a HUD home: The one- to four-unit residential properties that HUD sells come into HUD’s possession as a result of defaults on mortgages insured by the Federal Housing Administration (FHA), which is part of HUD.

Owner-occupants get first dibs, after which bidding opens to investors. HUD pays the lender what is owed and then sells the properties to the public to make up the deficit from the foreclosure.

You can look at available properties at the HUD Home Store but must have a HUD-approved real estate broker or agent submit a bid for you.

Recommended: FHA Loan Mortgage Calculator Table

Who Can Qualify for a HUD Home?

If you have the cash or can qualify for a loan, you may buy a HUD home.

Following the priority bidding period for owner-occupants, HUD-approved nonprofit organizations, and government entities, unsold properties are available to all buyers, including investors.

If you will be an owner-occupant, you must plan to live there for at least a year and can’t have purchased another HUD home within the last two years.

If you will need an FHA loan or other mortgage, expect to pass income and credit checks.

If you are buying as an investor, you’ll need to wait 30 days before bidding on a single-family HUD home listed as “insured” or “insured with escrow,” up from 15 days as of January 3, 2024. Homes with those designations are eligible for FHA-insured financing, meaning they may only need cosmetic repairs or nonstructural repairs of up to $10,000.

If the home is listed as “uninsured,” buyers cannot get a typical FHA loan, but they may be able to use an FHA 203k loan — a program that allows buyers to make repairs after closing and finance the cost into their loan.

Recommended: The Most Affordable Places to Live in the US

HUD Assistance Programs

HUD sweetens the pot to help make the dream of buying a home come true.

•   With the Dollar Homes program, low- or moderate-income families can purchase a HUD-owned home for $1. The Dollar Homes are single-family homes that have been in foreclosure and the FHA has been unable to sell for six months. The vacant homes have a market value of $25,000 or less.

•   The Good Neighbor Next Door Program rewards law enforcement officers, K-12 teachers, firefighters, and emergency medical technicians with a 50% discount on the list price of the home. It must be the homebuyer’s principal residence for three years.

HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this “silent second,” provided that you fulfill the three-year occupancy requirement.

•   You might also find that the FHA HUD $100 Down Program is available in some areas. This involves buying a home with just $100 down vs. the usual requirement.

Buying a HUD Home

Buying a home is a big deal, especially if you’re a first-time homebuyer. How to buy a HUD home, though? Know that buying a HUD home is different from purchasing other properties. For one thing, it has to be sold at auction. If you get the winning bid, HUD contacts your agent and gives you a settlement date, often about 30 to 60 days to close.

Do keep in mind that with HUD, you get what you get. These homes are sold as is. At least go in with your eyes wide open about what you’re purchasing.

Finding HUD Homes

HUD homes exist in their own universe. You can’t find them just anywhere like other homes. You can find them on the agency’s website, the HUD Home Store, and in links to listings of homes being sold by other federal agencies.

Financing

You can finance a HUD home like any other home, though the lender will need to be HUD-approved. You may want to start by finding down payment assistance programs.

Also search for options like an FHA loan, which may be easier to obtain if you have credit issues, costs may be lower, and a lower down payment may be required than elsewhere. You might want to look into FHA 203k loans as well.

If you’re a veteran, a current member of the armed forces, or the spouse of a service member, consider looking into VA loans that might offer you better terms than other loans.

Getting preapproved for a loan is a good practice generally and particularly when you’re going after a HUD home. You’ll want to be ready to pounce if you get the green light on the home you’ve got your heart set on.

Recommended: Home Loan Help Center

HUD Homes vs Conventional Homes

Ready to compare HUD homes vs. conventional homes? Here’s the intel in chart form.

Pros and Cons of HUD Homes

Now, here’s how the pros and cons of HUD homes stack up.

First, the pros of HUD homes:

•   A low down payment can make purchasing a home more affordable.

•   There’s help with closing costs, which can make a big difference in home-buying expenses.

•   Homes may be priced below market value, making them more within reach for limited budgets.

•   Also, you may get a jump on the marketplace because investors must wait 30 days to shop.

As for the cons, here are the key ones:

•   Home is sold in “as is” condition, which can mean there’s a lot of work (DIY projects or otherwise) to be done.

•   You must use a HUD-approved real estate agent or broker, which can limit options.

•   Limited supply, sold at auction, so you may not have your pick of properties.

•   There are restrictions. As the owner-occupant, you need to live there for at least a year (three for the Good Neighbor program), and you can’t purchase another HUD home for at least the next two years.

The Takeaway

Whether you’re buying a HUD home for your own use or as an investment, getting financing lined up is essential. Getting pre-qualified and then pre-approved for a home loan lay the groundwork.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What does HUD do?

HUD is an agency of the federal government that is responsible for national policy and programs that address housing needs in the US.

How do you qualify for HUD housing in California?

Requirements will vary depending on where in the state you live, so check with your local housing authority. For example, a family’s gross annual income must be below 50% of the Area Median Income (AMI) in Los Angeles County.

What are the different types of HUD?

There are several types of HUD programs, including FHA Mortgage and Loan Insurance, Section 8, Public Housing, and Fair Housing Assistance Program.

Photo credit: iStock/CatLane

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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