Condo vs. Townhome: The First Steps to Understanding What’s Right for You

At first glance, condos and townhomes can look similar. The key difference comes down to ownership. When you buy a condo, you own the interior of your unit, while the land, exterior, and common areas are collectively owned by all residents. With a townhome, you own a small piece of land under and sometimes just outside of the footprint of the unit. 

Looks Can Be Deceiving

Many assume they can tell a condo from a townhome just by looking at it. If the units are side by side with small yards, they must be townhomes, right? Not necessarily. Some condos have private yards, and some townhomes have no yards at all.

That said, a high-rise unit or a second-floor walk-up is almost always a condo. More simply, if the unit isn’t at ground level, it’s nearly certain to be a condo. But to be sure, take a look at the legal description.

• • Townhomes reference a “lot and block“ in the legal description, often alongside a subdivision name.
    • Example: “Lot 2, Block 1, Smith Subdivision” → This is a townhome.

• • Condos list a unit number and often include the word “condominium.”
    • Example: “Unit 105, Building 5, Smith Condominiums“ → This is a condo.

Financing Differences

Lenders treat townhomes like single-family homes, which typically makes getting a loan easier. In contrast, condos often face extra lender scrutiny because lenders evaluate not just your financial health but also that of the entire condo association.

Lenders may evaluate:

• • Owner-occupancy rate – Financing may be denied if too many units are rentals.
  • Financial reserves – Certain loans may be unavailable if the condo association’s monetary reserves are low.
  • Loan eligibility – FHA and VA loans are harder to secure for condos, and conventional loans may require a higher down payment.

Market conditions also matter. In a strong market, financing a condo may be relatively easy. However, in a slower market, restrictions can tighten, making some condos harder to finance. The bottom line is that all else being exactly equal, a townhome carries less risk. 

So—Should You Avoid Condos?

Not at all! While townhomes generally have fewer financing hurdles, a condo might still be the right choice. The right condo can offer a better location, desirable amenities, or unique features that make it worth considering. Also, budget is always a consideration. You might not find a townhome that meets your needs within your budget. If that’s the case, a well-chosen condo can still be a wise investment. The goal isn’t to say townhomes are always better but to help you understand the trade-offs. Rather than making a blanket recommendation, we’ll help you evaluate each property individually, taking into account your needs, goals, and financing options. 

Our job isn’t just to explain the differences—it’s to help you think critically about what matters most to you. When it’s time to make an offer, you’ll have the knowledge to make a wise decision and a clear understanding of what to expect.