When the time homes to buy your first home, you will have options galore. Here’s how to decide if you should purchase a single-family home or a more affordable condominium unit.

Undoubtedly, buying a home is without doubt the largest financial decision you’ll probably make in your lifetime. It is critical to make sure the home you purchase is in alignment with both your current and future financial situation. A safe approach financial planning approach would be to take a mortgage payment including other obligations, not bigger than 36% of your monthly income. For example if your income is $8k per month and you have $400 per month payment on a car loan, your goal would be mortgage payment not bigger than $2,480 per month. Remember the lower the percentage of your obligations goes to liabilities (yes a mortgage payment is a liability) the more discretionary income you have left over for saving i.e. creating wealth for yourself.

The type of property you purchase will play an inevitable role in what kind of budget you have as well as your ability to save. Following are things to consider if you’re trying to decide whether or not to buy a single family home or condominium unit.

Rules and regulations– joint housing projects such as condominium units have homeowner’s associations that govern and regulate what can and cannot be done. Some of these restrictions might mean not being able to paint your unit a certain color, not being able to park in a certain parking place etc. In exchange for these rules and regulations, you pay a fee in the form of a monthly homeowner’s association payment to fund the master reserve. Single-family residences do not have such requirements or restrictions.

HOA payment– this is a variable monthly fee set by the homeowners association with majority vote. This can range anywhere from $200 to $400 per month in most situations. This fee can wane on your finances in shaping how much home you can buy.

Some condos may be ineligible- The property could be what’s called an “unwarrantable”. A prime example of this is some of the units were finished and some of the units were not finished in the original phase of construction. In such instances even a traditional conventional loan would not work to purchase this type of condo unit.

Single-family homes cost more- At least 3.5% down for a down payment for a single-family home for an FHA loan or 5% down for a conventional loan is needed. The same holds true with the condo. The cash that you’ll need to get your foot in the door will be lower for a condo. So if you’re tight on cash, a condo could be a good fit.

Your ultimate deciding factor could be the relationship in payment to price

You might be paying the same for a house as you would for a condo in total housing payment expense despite the swing in purchase price. You heard that correctly. It is realistic a $425k house, could generate the same payment on a monthly basis as a $325k condominium unit. The homeowner’s association payment is the culprit. The homeowner’s association payment is in addition to your PITI (principal, interest, taxes and insurance, and possibly mortgage insurance).

The homeowner’s association payment plus your PITI (principal interest taxes and insurance and in some cases mortgage insurance) could be equal to what you would pay for a single-family house due to the amount of the HOA payment. You could be paying the same monthly amount for a condo when you could have a single-family house without the additional expense of the homeowner’s association payment. In some cases the payment even might be lower for a single-family home due to other cost variables such as your down payment, credit score, and loan program.

The decision as to what makes the most financial sense is yours. A smart home buyer ought to consider how much more a condo might be in terms of real costs than owning a single-family home despite the fact a single-family home usually carries a higher price point.

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