You might get confused about when to use "That's ___" and when to use "It's ___". Use "That's ___" to comment on something that someone has just said:
A: I'm pregnant.
B: Really? That's great!
You can use "It's ___" to comment on the general topic of a conversation. For example, if you're talking about a house that you bought, you can say:
It's small, but it's nice.