Condo vs Townhouse vs Single Family Home: Learn the Differences and More
If you’re getting started in the homebuying process, you might be trying to decide between a condo vs townhouse vs single-family home. Each has its own benefits and drawbacks, but the best choice depends on what you want your living situation to look like.
In this article, we’ll break down the pros and cons of each property type, how to choose the right one for your situation, and the home loan options available for each.
One of the most common things homebuyers don’t understand is the difference between a condo and a townhome. While there are many similarities, such as both typically being run by a homeowners association (HOA) and having shared amenities like pools, gyms, and landscaping, these two types of homes also have several differences.
The biggest difference is what’s included in your deed of ownership and what the association must maintain. With most townhouses, you own the unit itself, including the interior and exterior walls, the roof, and the land it sits on, often along with a private yard, driveway, or garage. Some townhouse communities are legally set up as condominiums, though, so check the deed and HOA documents to see exactly what you own.
In a condominium, your ownership is a little different. Instead of owning the entire unit, you own the space inside the condo walls. You also share ownership of common areas like hallways, parking, the pool, and more. However, the association typically maintains these common areas, and you pay for that through your HOA dues.
When considering both resale and investment potential for a condo vs. a townhouse vs. a single-family home, the most important factor is appreciation potential. Single-family homes typically have the advantage because the owner usually owns both the structure and the land. Townhouses also own land, but on a smaller scale, and it’s typically shared with other townhouse owners.
Single-family homes also tend to appeal to a wider range of buyers, which can affect demand. While condos and townhouses may appeal more to first-time homebuyers, families may want more space and privacy, which can increase demand for houses.
When considering a condo, it’s important to understand the association’s financial health. Underfunded reserves, pending litigation, and upcoming special assessments can make selling a condo difficult.
If you’re buying for investment, you’ll want to understand the limitations of using an FHA loan. FHA loans require borrowers to use the property as their primary residence for at least the first 12 months.
When deciding whether it makes the most sense to buy a condo, townhouse, or single-family home, consider your lifestyle, budget, future plans, and how much responsibility you want for property maintenance.
Knowing how you plan to finance the home will be crucial, especially if you plan to use an FHA loan.
If you want to live somewhere that doesn’t require much maintenance and you’re interested in amenities like a nearby gym or pool, buying a condo might make sense. This could fit your lifestyle and likely come with a lower price tag.
Just be aware that, before you start the buying process, condo buildings can be a little trickier to purchase with an FHA loan. The FHA requires the building itself to be FHA-approved, or you’ll need to go through the process to get single-unit approval for the condo you’re planning to purchase.
If you’d like a little more space than a condo can provide but aren’t sure you want to handle all the maintenance that comes with owning a single-family home, consider buying a townhouse.
Most townhouses include more square footage, and some are multi-floor. The HOA typically handles mowing, snow removal, and other maintenance outside the townhouse.
If you’re thinking about using an FHA loan to purchase a townhouse, you’ll need to find out how the development is legally classified. Some are treated just like a single-family home, where FHA financing is much easier. However, others are similar to condos, where the entire unit of attached townhouses needs to meet FHA’s criteria or get single-unit approval.
If privacy and space are your top priorities, buying a single-family home is likely the best choice. You’ll have the freedom to update your home (some HOAs require approval before exterior work), but you’ll also be responsible for all maintenance and upkeep.
From an FHA perspective, buying a single-family home is often the most straightforward option when using an FHA loan. That’s because the typical detached single-family home doesn’t have all the condo project approval requirements. The home and borrower just need to meet the FHA loan, appraisal, and property requirements.
Typically, a townhouse's purchase price is higher than a condo's. However, overall ownership costs could be lower if the condo building has high HOA fees or a higher risk of special assessments.
Usually, a condo has lower ongoing maintenance costs because the HOA handles upkeep of things like the roof, siding, and common areas. However, this largely depends on how much your HOA dues are. If the condo’s HOA isn’t run efficiently, it may have a small reserve, which could mean you're responsible for a special assessment if a large building project needs to be completed.
You could rent a townhouse or condo later on, but there are a couple of considerations. First, review the bylaws for your condo or townhouse. Many bylaws specify whether renting is allowed. Additionally, FHA rules require you to use the property as your primary residence for the first 12 months.
