What Is A Townhouse: Guide To Buying A Townhouse

Buying a home comes with a lot of decisions, including choosing the type of property that best fits your needs. Townhouses have become a popular option for homebuyers looking for something sized between a single-family home and a condo. If you’re considering a townhouse purchase, understanding what they are and how to finance one could help you feel confident as you take the next step. 

Subscribe to our blog to receive notifications of posts that interest you!

What is a townhouse? 

A townhouse, or townhome, is a multi-level property that shares one or more walls with neighboring units but offers the privacy of a separate entrance. These homes are typically part of a row of similar properties and may include small outdoor spaces like patios or yards. Townhouses offer the feel of a single-family home with the convenience of shared community amenities, often making them a great option for buyers who want a low-maintenance lifestyle with a bit more space. 

Can you get a mortgage on a townhouse? 

Yes! Financing a townhouse works just like financing other types of properties. Townhouses are eligible for popular mortgage options, including conventional loans, FHA loans, VA loans, and USDA loans, as long as they meet standard property and loan guidelines. A lender like Direct Mortgage Loans will review your credit score, income, debt-to-income ratio, and other factors to help you find the best loan for your budget and goals. 

Differences Between Townhouses, Condos, Apartments and Single Family Homes 

Townhouse vs Apartment 

Apartments are typically rented spaces within larger buildings, and renters don’t own the property. Townhouses, on the other hand, are owned homes that share walls with neighboring units but have private entrances and often a small yard or garage, providing a bit more privacy and ownership benefits. 

Townhouse vs Condo  

Townhouses and condos are similar in that they can both share walls with neighboring units, but the difference lies in ownership. When you buy a townhouse, you typically own the interior, exterior, and the land your home sits on. Condo ownership usually only includes the interior space, with shared ownership of common areas. 

Townhouse vs Single Family Home 

A single-family home is a detached property with no shared walls, often with a larger yard and more privacy. Townhouses are attached properties with shared walls but may offer similar living space at a more affordable price and with lower maintenance responsibilities, thanks to community associations. 

Different Types of Loans for Townhouses 

Conventional Loan 

Conventional loans are a popular option for townhouse purchases and often offer competitive rates. These loans are not backed by the government and typically require higher credit scores and down payments compared to government-backed loan options. 

FHA Loan 

FHA loans are insured by the Federal Housing Administration and are designed to make homeownership more accessible. They offer lower down payment options and flexible credit requirements, making them a great choice for first-time homebuyers. 

USDA Loan 

If your townhouse is located in an eligible rural area, you may qualify for a USDA loan. These loans offer benefits like zero down payment and affordable interest rates to support homeownership in designated communities. 

VA Loan 

VA loans are available to eligible veterans, active-duty service members, and surviving spouses. These loans offer advantages like no down payment, no private mortgage insurance, and competitive interest rates.

Homebuying Programs to Help You Purchase a Townhome 

FHA 100% DPA 

With FHA 100% Down Payment Assistance, qualified buyers could receive support to cover their entire down payment, making homeownership more achievable without a large upfront cost. 

Eligibility for 100% FHA DPA 

To qualify, you’ll typically need to meet FHA loan guidelines, including a minimum credit score, steady income, and plans to live in the home as your primary residence. Some programs may also have income limits and location-based requirements. 

Good Neighbor Next Door Program 

The Good Neighbor Next Door Program helps eligible public service workers—like teachers, law enforcement officers, firefighters, and EMTs—purchase homes at a 50% discount in certain revitalization areas, provided they live in the home for at least three years. 

Pros and Cons of Purchasing A Townhouse 

Pros of Townhouses 

• Affordability: Townhouses often come with a lower price tag compared to traditional single-family homes, which could make them an attractive option for first-time buyers or anyone seeking homeownership on a budget. This affordability could allow you to purchase in desirable neighborhoods that might otherwise be out of reach if shopping for a detached home. Lower costs also often translate into more manageable monthly mortgage payments, helping you stay within your financial comfort zone. 
• Low Maintenance: One of the biggest perks of townhouse living is the reduced maintenance. Many townhouse communities include homeowners’ associations (HOAs) that take care of exterior upkeep. This might include tasks like landscaping, snow removal, roof repairs, and even exterior painting. For homeowners who want to spend less time on chores and more time enjoying their home, this can be a huge advantage. 
• Amenities: Townhouse communities often provide shared amenities designed to enhance your lifestyle. Depending on the neighborhood, you may have access to swimming pools, fitness centers, walking trails, playgrounds, or clubhouses. These perks are typically maintained by the HOA and give you added value and recreation options without the hassle of maintaining them yourself. 

Cons of Townhouses 

• HOA Fees: While HOAs provide valuable services and amenities, they come with monthly or annual fees that add to your housing costs. These fees can vary significantly depending on the size of the community and the number of shared amenities. It’s important to budget for these fees upfront and understand that they can increase over time based on the community’s needs. 
• Shared Walls: Townhouses share one or more walls with neighboring homes, which can impact privacy. Although modern construction methods help minimize noise transfer, you’re still in closer proximity to neighbors than you would be in a single-family home. This is something to consider if you value maximum privacy or quiet.
• Limited Outdoor Space: Unlike single-family homes that may come with larger backyards, townhouse outdoor areas are typically smaller, such as compact patios, decks, or small fenced yards. While this means less yard work, it can be limiting for those who want expansive gardens, outdoor entertaining space, or room for kids and pets to play. 

How To Buy A Townhouse 

Determine Your Budget 

Start by assessing your income, expenses, and savings to determine how much you can afford. You can also use the home affordability calculator that Direct Mortgage Loans offers to those looking to buy their next home. Factor in your down payment, closing costs, monthly mortgage, and HOA fees, which are common in townhouse communities. Use a home affordability calculator to refine your price range. 

Get Preapproved 

A mortgage preapproval helps you understand your loan options and strengthens your offer. Lenders will review your credit, income, and debts to determine how much you qualify for. With a preapproval letter from Direct Mortgage Loans, you can confidently shop for a townhouse. 

Find the Right Townhouse 

Consider factors like HOA rules, amenities, location, and property condition. Townhouses often come with shared spaces, so review what’s covered in HOA fees and any community restrictions, such as rental or pet policies. 

Make an Offer 

Once you find the right home, submit a competitive offer based on market comparisons. Work with your agent to negotiate terms, including contingencies for inspections and HOA reviews. 

Complete the Home Inspection and Appraisal 

Schedule a home inspection to check for potential issues, including shared walls, roof conditions, and HOA maintenance responsibilities. Your lender will also require an appraisal to confirm the property’s value. 

Close on Your Townhouse 

Finalize your loan, sign closing documents, and pay any remaining costs. Once complete, you’ll receive the keys and officially become a homeowner! 

FAQ’s About Buying A Townhouse 

Is it better to rent or own a townhouse? 

This depends on your financial goals and lifestyle. Renting can offer flexibility with fewer responsibilities for maintenance and repairs. However, owning a townhouse allows you to build equity over time, benefit from potential property appreciation, and customize your home to your liking. If you’re planning to stay in the area for several years and want to invest in your future, buying may be the better long-term option. 

Which is cheaper, a townhouse or a condo? 

Prices can vary by location and amenities, but generally, townhouses tend to offer more space for the price compared to condos. With a townhouse, you typically own both the interior and the land beneath your home, which can add to its value. Condos may have lower purchase prices but often come with higher HOA fees that cover extensive shared amenities and maintenance. 

How much money do you need to buy a townhouse? 

The amount you need depends on the loan program you choose and the price of the property. FHA loans can require as little as 3.5% down, while VA and USDA loans may offer zero down payment options for qualified buyers. Beyond the down payment, you should also budget for closing costs, which typically range from 2% to 5% of the purchase price, and other upfront expenses like inspections and moving costs. 

Do townhouses appreciate in value? 

Yes, townhouses generally do appreciate over time, though appreciation rates can vary depending on the local real estate market, community upkeep, and demand. While single-family homes may historically appreciate faster, townhouses in desirable locations with strong amenities and good HOA management can still provide solid long-term value and investment potential. 

Are townhouses a good investment? 

Townhouses could be a smart investment, particularly if you’re seeking a lower-cost entry point into homeownership. They often appeal to first-time buyers, downsizers, and renters transitioning to ownership, which helps maintain strong demand. Additionally, lower maintenance responsibilities and community amenities could make townhouses attractive to future buyers, supporting good resale potential. 

Can you buy a townhouse and rent it out?  

Yes, you can rent out a townhouse as long as your loan and community guidelines allow it. If you’re financing your purchase with certain loan types, like an FHA loan, you may be required to live in the home as your primary residence for a period before renting it out. Also, some HOAs have restrictions on renting out properties, so it’s essential to review the community’s rules before purchasing with rental intentions. 

Rates are subject to change. Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Direct Mortgage Loans, LLC NMLS ID# is 832799 (www.nmlsconsumeraccess.com). Direct Mortgage Loans, LLC office is located at 11011 McCormick Rd Ste 400, Hunt Valley, MD 21031.