When you’re shopping for a new home, the property type you choose can affect more than just your lifestyle—it can directly impact your mortgage process.
Condos and townhouses may seem similar at first glance, but they carry key differences that influence financing, insurance, and long-term costs.
This guide breaks down how each type of property works, what makes them unique, and how their differences can affect your financing options. If you’re unsure which is the better fit for your budget and goals, read on.
Finance your next home purchase with GO Mortgage.What is a condo?
A condominium, or condo, is a private residence within a larger community of units. Condo owners typically own only the interior of their unit, not the exterior.
The exterior walls, roof, and common areas, such as hallways, gyms, pools, and parking lots, are jointly owned and maintained through a homeowners’ association (HOA).
Condos often come with perks like on-site amenities and lower entry prices compared to single-family homes. However, they also involve:
- Monthly HOA fees (sometimes high, depending on services offered)
- Shared walls and less privacy
- Limited control over exterior modifications
Your HOA handles landscaping, roof repairs, and common area upkeep, but you’ll pay for it through monthly dues. And depending on how the association is managed, that can affect whether your condo qualifies for certain loans.
What is a townhouse?
Townhouses, like condos, are typically attached homes with at least one shared wall. But unlike condos, townhouse owners usually own both the interior and exterior of their unit, including the land it sits on, the roof, and possibly even a small yard.
Townhouses often feature:
- Multi-story layouts
- Private garages or basements
- Smaller or optional HOA involvement
While townhouse communities may include shared amenities such as pools or clubhouses, HOA fees tend to be lower than those in condos because owners take more responsibility for individual upkeep.
How do financing requirements differ?
From a lending perspective, townhouses are generally treated like single-family homes. As long as you qualify as a borrower, lenders can proceed with standard underwriting without additional project-level reviews.
Condos, however, come with an extra layer of complexity. That’s because lenders aren’t just approving you—they’re also evaluating the health and compliance of the condo project itself.
To finance a condo, the development must meet specific eligibility criteria set by the loan program you’re using—whether that’s an FHA, VA, USDA, or conventional mortgage. These rules vary but may include:
- A minimum percentage of owner-occupied units
- Limits on how many units one investor can own
- Financial health and reserve requirements for the HOA
- No ongoing structural or legal issues
Before you fall in love with a condo, it’s a good idea to check if it’s on the FHA-approved condo list or ask your lender to review the project’s eligibility.
Why is financing a condo more complex?
Lenders view condos as higher-risk investments for several reasons:
- Shared liability: If the HOA is poorly managed, delays important repairs, or falls behind on bills, the value of every unit could be affected.
- Market impact: Condos are often more sensitive to market downturns. If unit owners begin to default, the entire project can lose value.
- Regulatory requirements: Each loan type has its own certification rules, and they can be detailed. FHA, for instance, requires projects to apply for formal approval, which must be renewed every two years.
These factors don’t mean condos are a bad choice, but they do mean your lender will look closely at more than just your credit score and income.
What role does the homeowners’ association play in your loan?
Whether you’re considering a condo or a townhouse, the homeowners association (HOA) plays a major role, not just in your daily life, but in the eyes of your lender.
Mortgage providers evaluate the financial and legal status of the HOA to ensure it’s not at risk of default, mismanagement, or litigation that could harm the property’s value.
Here’s what lenders typically assess:
- Delinquency rate: If more than 15% of homeowners are behind on dues, the project may not qualify
- Reserve funding: Healthy reserves are needed for future repairs, especially in older communities
- Pending litigation: Ongoing lawsuits involving the HOA could disqualify the property from certain loan programs
- Insurance coverage: The HOA must have adequate coverage for common areas and general liability
Before moving forward, ask the HOA or property manager for a copy of the budget, insurance certificate, and reserve study.
Reviewing these with your lender can help avoid surprises during underwriting and give you peace of mind about the financial stability of your future community.
What does this mean for your mortgage rate and down payment?
If a condo project isn’t already approved or doesn’t meet guidelines, you may:
- Face a higher interest rate
- Need to make a larger down payment
- Have fewer loan options available
- Be limited to certain lenders or portfolio loans
With a townhouse, those risks are much lower. Because you own the structure and land, there’s no need for a project approval process, and you can typically qualify for standard loan products with standard terms.
That said, every buyer’s financial profile is different. A well-managed condo may still be a strong option depending on your goals, location, and preferred amenities.
How to choose the right home for your budget
When comparing condos and townhouses, consider more than just the sticker price. Look at:
- HOA dues: Condos often have higher fees, which impact your monthly payment.
- Maintenance responsibilities: Townhouses may cost more over time due to personal maintenance.
- Loan eligibility: Is the property type limiting your financing options?
- Long-term value: How does resale value compare in your area?
If you’re unsure how these factors stack up, try our mortgage payment calculator to get a clearer picture—or talk with a mortgage advisor for tailored insight.
Want to dig deeper into homebuying strategies? Here are a few helpful resources:
Let’s find the best fit for your finances
Whether you’re drawn to the low-maintenance appeal of a condo or the independence of a townhouse, GO Mortgage can help you explore financing options that fit your budget, timeline, and goals.
Our team is here to answer your questions, walk you through eligibility, and guide you from preapproval through closing.
Ready to compare rates or get clarity on your best path forward? Get personalized guidance on condo or townhouse financing today.