If you’re considering buying a smaller home with less maintenance, you might find yourself debating between a condo and a townhouse. While both options offer distinct advantages, understanding the key differences, especially in terms of mortgages, can help you make a more informed decision that aligns with your financial and lifestyle goals.

Understanding Condo vs Townhouse

A condo, or condominium, is typically a unit within a larger building or complex. As a condo owner, you own your individual unit, but you also share ownership of common areas, such as gyms, pools, and lobbies. These are managed by a homeowner’s association (HOA), which collects fees to cover the maintenance of these shared spaces and the building’s exterior.

A townhouse is a multi-story home that shares one or more walls with other similar units but often comes with its own entrance and sometimes a private garage. Unlike condos, townhouse owners usually own the land directly around their homes, giving them more control over their property. Townhouses can also have HOAs, but the scope of their responsibility is generally less extensive than in condominium setups.

Mortgage Considerations for Condo and Townhouse

Choosing between a condo and a townhouse can significantly affect your mortgage options:

• Condos: Financing a condo can be tricky. For a mortgage to be approved, the condo project itself must meet the lender’s criteria, which includes a review of the HOA’s financial health and rules. Some loans, particularly those backed by government agencies like FHA and VA, have strict criteria on which condos qualify, often referred to as “warrantable” condos. If you’re looking at a condo, you might face higher fees, especially if your down payment is less than 25%.
• Townhouses: Generally, townhouses are easier to finance than condos. They are often viewed more like single-family homes by lenders, especially if part of a Planned Unit Development (PUD). This can lead to more favorable interest rates and terms. However, if the townhouse is classified similarly to a condo, it may be subject to the same financing complexities as condos.

Financial Implications

The financial aspect of owning a condo or townhouse goes beyond the purchase price. Condos might come with higher ongoing costs due to HOA fees and potential special assessments, but they also offer less maintenance hassle. Townhouses might offer more privacy and space but often come with higher repair and maintenance responsibilities.

Making the Right Choice

When deciding between a condo and a townhouse, consider your lifestyle preferences, your budget for both upfront costs and ongoing expenses, and how much autonomy you want over your property. It’s also crucial to work with a real estate agent who can provide detailed insights into the specific rules and financial health of the HOA, whether you’re looking at a condo or a townhouse.

Need Help Deciding?

Choosing the right type of home is a significant decision that depends on your personal needs and financial situation. If you’re unsure which option is best for you, or if you have questions about financing a condo or townhouse, I’m here to help.

Chenine Lozano
Real Estate Finance Expert
562-762-7511

Reach out today for personalized advice and to explore your best options for homeownership.