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2019-03-21 11:27:55
2 Things to Consider Before Buying a Townhome

If you’re like many home shoppers, you understand that there are differences between condos and townhomes but you don’t quite understand what those differences are. This is because there are also similarities, most notably that townhomes are frequently governed by a homeowner association (AKA an HOA) and condos almost always are.

I don’t know about you, but when I think about condos, I picture a large structure with lots of units. This is typical of many of our condo communities. The problem with describing the home in this manner, however, is that the word “condominium” is a form of ownership, not a type of structure.

There are three main types of homeownership:

  • Fee Simple: Ownership of the land and the home.
  • Condominium: Sole ownership of one unit in the community and joint ownership of common areas.
  • Cooperative: Ownership of shares in a corporate-owned building with the right to live there but the person doesn’t actually own the unit.

The condo owner owns only what is between the walls of his or her unit and has an ownership share in the common areas. The word townhome, on the other hand, is a structure that usually has at least two stories, it is attached to at least one other home but each home has its own front door to the street, not a hallway as many condos do.

To make it even more confusing, townhomes can be owned as 'condominiums' or 'fee simple' ― meaning the homeowner not only owns the home, but the land on which it sits as well.

Let’s take a look at two of the most significant questions you should ask when you’re considering buying a townhome.

1. Homeowner Association

Buying a home in a managed community means that you’ll be required to pay monthly HOA dues and other fees. These can be quite significant, so take them into account when determining how much you can afford to spend on housing every month.

Also, ask questions about anything in the HOA documents that you don’t understand.

2. Getting Financed

If you’ll be taking ownership of a townhome as a 'condominium', rather than 'fee simple', the lending process is a bit different.

The lender may look at the owner-occupancy rate in the community. If the tenant-occupied rate is more than 30%, then you may have to search long and hard for a lender who will take it on.

The lender will also peruse the documents to determine the number of homeowners that are behind in their dues payments. If that number exceeds 15% of all homeowners in the community, you’ll again have trouble finding a loan.

Townhome living is ideal for those that want the benefit of homeownership at a cheaper price and without some of the maintenance chores that come with a detached home like yard care, trash pickup, and snow removal. Do a bit of homework, however, before agreeing to purchase.

 
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