Townhomes and condominiums can offer homeowners many benefits, including convenience and lower maintenance, but purchasing this type of home can also present challenges. Due to the way condos and townhomes are categorized by mortgage lenders, they often have mortgage requirements that are more stringent than those of a conventional home loan. To best understand the process of purchasing a condo or townhome, it is important to know how these properties are classified. Mortgage lenders classify homes by type, which includes:
- Detached homes - the residents share no walls with another dwelling
- Semi-detached - sharing a single wall
- Attached - sharing more than one wall
In simplest terms, more shared wall space means more risk. This is due to the fact that shared walls are subject to unknown residents causing potential damage. The increased risk can mean a different type of loan approval process or different loan rate. As your mortgage lender, I would be happy to discuss this process with you.
Additionally, properties are classified by how space is owned. For example, a condominium owner has no title to their land. However, a townhome owner often owns the ground directly beneath the dwelling. This is called a "zero lot line" because the homeowner does not own the yard. In some cases, townhome owners have a small yard or patio, which would give them ownership of an amount of land outside the boundaries of the home.
Condo owners purchase an individual unit up to the walls, but no exterior property is owned. Condo owners often also purchase a stake in the community's facilities and common areas, which an HOA board is responsible for maintaining. Townhome owners often purchase the entire unit, including exterior walls and the land on which the unit sits.
Before buying a condo or townhome, make sure to do adequate research on the fees and restrictions that may apply. Some of these fees and restrictions could involve HOA dues, assessment fees for community projects, rental caps and more.
If you are interested in purchasing a new townhome, condo or single-family home, I am happy to help. My goal is to work with you to find the perfect home to fit your needs. Call me today to set up an appointment.