Buying a property is an exciting endeavor, but it is one that requires research and understanding beforehand. Part of that research involves learning the differences between a condo vs. townhouse mortgage.
Thinking About Buying a Condo or Townhouse?
If you’re in the process of purchasing a home, it’s crucial to weigh the differences between condos and townhouses to determine which property makes the most sense for your situation.
Condos and townhouses have subtle but unique distinctions that are important to identify.
A condo, or condominium, is a single building or a community of buildings with separate units owned by individual residents. They generally share walls with adjacent units. Residents own and maintain their unit’s interior but don’t own the property on which it sits. The Homeowners Association maintains the exterior, lawn, and communal spaces.
A townhouse or townhome is a single-family home that shares one or more walls with other independently owned units. They often feature two stories, as well as outdoor space. Residents own their interior units, as well as exterior walls, the lawn, and the roof.
What to Know About the Mortgage Options for Each and Any Key Differences
When it comes to comparing mortgage options for condos and townhouses, there are a few primary distinctions. One of the biggest differences has to do with the fact that a condo owner doesn’t own the land. Owners are only purchasing the space between the unit’s walls.
With a townhouse, owners have rights to the dirt and everything above and below the dirt. Getting a loan for a townhouse works similarly to getting a single-family home and is less complicated than getting a condo loan.
When obtaining a mortgage for a condo, one has to qualify as a borrower and ensure that the condo is approved based upon various government requirements. While the beginning steps to qualify for a mortgage are similar to applying for a loan on a condo, the rest of the process involves more action.
Similarly to a townhouse mortgage, a loan officer checks the borrower’s income, credit, and assets and determines the best product for the purchase or refinance. In addition to evaluating the borrower’s financial health, the lender also needs to assess the financial health of the condo. Additionally, lenders examine the condo’s Homeowner Association before the mortgage approval.
If you’re applying for a condo mortgage, you will need to determine whether you’re financing a “warrantable” condominium. This simply means it meets the legal guidelines for mortgage lending. Non-warrantable condo financing is more expensive, requires higher down payments, and may not even be offered by some lenders.
How LLCR can Guide you in Finding and Buying the Right Property for you
Whether you still need guidance comparing condo vs. townhouse mortgages, or if you’re ready to begin searching for your dream property, a Luxury Living Chicago Realty broker is eager and available to walk you through the process.
Let one of our experienced and licensed team members answer any questions you have and secure a property that is most suitable for your wants and needs.