Are you buying a townhome – or is it a condo?

In the Minneapolis/St Paul area, there are lots of townhomes and condos for sale.   The most important thing for you to know when you are buying one is if it is a condo or a townhome!  It seems like it should be easy, right?  A townhome is a single unit, usually in a row of homes that are connected to each other.  A condo looks like an apartment building, right?  Not always.  

In this area, there are lots of townhomes that look like townhomes but are legally a condo.  The best place to look is in the legal description.  If the legal description says something about a CIC number, a unit number and maybe even the word condominium, you are probably buying a condo.  If the legal description says there is a lot and block and if there is some type of acreage (.25 acre for expample), you are probably buying a townhome.  With a townhome, you will own the land under the building, in a condo, you do not.

Who cares and why does it matter?  Depending on your financing, it can be very important!  If you are using FHA financing, a condo has to be FHA approved.  There is a list on FHA's website and it gets updated frequently.  Condos have to be updated every few years and not all associations want to deal with getting the approval.  Townhomes do not have to be FHA approved.

If you are using conventional financing, condo's have to meet the investor guidelines.  Depending on your down payment, we may need more information and sometimes the file has to go to the investor for condo approval.  Usually if you have 20% down or more, the condo approval is fairly easy.  If the condo has a lot of rentals or maybe a lot of foreclosures, there will be a chance it won't be approved.  If the association has any ongoing litigation, chances are it will not be approved.  If there is retail development in the building, maybe a hotel or stores, the approval will be more difficult.

Make sure your realtor knows if the property is a condo or a townhome, look over the association documents as soon as you can.  If you have any questions on the association, make sure you get them answered.  If the property is a condo, make sure it's FHA approved if you are using FHA financing.

Townhomes can be much easier for financing, but you still want to make sure the association is strong.

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

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Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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