If you’re shopping for a new home and traditional single-family houses are out of your price range or the mere idea of lawn mowing and tree trimming makes you sweat, a townhouse could be the answer.
Many but not all buyers will find that townhouses rise to the occasion.
What Is a Townhouse?
Among the different home types, from condos to modular homes, are townhouses.
But what is a townhouse specifically? It’s a multifloor home with its own entrance that shares at least one wall (not floors or ceilings) with an adjacent townhouse. Townhomes may be part of a community of units with a uniform appearance, but that isn’t always the case.
Why Buy a Townhouse?
There are pros and cons of buying a townhouse, with benefits including the following:
• Low maintenance
Here’s more about each benefit.
It’s a bit tricky because some townhouses are sold as condos. If you buy a townhome as a condo, you will own just the inside of your unit. If you buy it as a townhouse, you’ll own the interior and exterior of the structure and the land under and sometimes around your property.
This means fewer restrictions on how you’d use your yard compared with a condo owner. Townhouse owners could, as just one example, have the right to grill in their private outdoor space.
Ownership of the structure and land also means that financing a townhouse is much less complicated than financing a condo. It’s basically the same as getting a mortgage for a detached single-family house.
Townhouses are typically less expensive than detached single-family homes, which can be especially important in expensive cities and for first-time homebuyers. Townhouses can serve as space-efficient choices, too, in places where land is scarce.
Note that townhouses may be more expensive than a condo in the same community.
Yards are likely smaller and, if the townhouse is part of a homeowners association (HOA), you may benefit from its security protocols and maintenance of shared areas. In some cases, you can enjoy amenities like pools because of HOA membership.
Some home downsizers may appreciate the lack of interior and exterior sprawl to maintain.
Recommended: First-Time Home Buying Guide
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Disadvantages of Buying a Townhouse
Buying a townhome can also come with disadvantages, including:
• HOA fees and restrictions
• Lack of privacy
Here’s more about each potential disadvantage.
If the townhouse is part of an HOA, there will be fees to cover shared services and spaces. Plus, HOA rules may limit how you can decorate your townhouse. Who is responsible for roof repair costs can cause confusion.
So be sure to find out the specifics of a townhome you’re interested in buying.
Lack of Privacy
Shared walls automatically mean less privacy than with a detached home, which can be especially problematic for families with young children. This can also be a consideration for young couples who may want to start a family or for other people for whom privacy is a plus.
Because townhouses are multistory dwellings, residents will need to climb stairs, which can be challenging for those with temporary or permanent mobility issues. Plus, if someone is used to a larger yard, having a small lot with neighbors nearby can feel constraining.
How to Buy a Townhouse
When buying a townhome, there are several steps to take.
Find a Real Estate Agent
Very few buyers go it alone, so finding a real estate agent who is experienced in your geographical location can help you to make savvy choices. This agent can guide you through the process of finding the right townhouse and help negotiate the best deal for you.
Know the Market
An experienced real estate agent can look into comps, or recently sold townhomes in the area that are similar in size, condition, and features, and you can also use a real estate website to find asking prices of similar townhouses and other real estate in the area.
If more than one buyer is interested in the same townhouse, you’ll need to be clear in your mind about how much you’re willing to pay for the property and strategically make an offer without busting your budget.
Investigate the HOA Fees
If the townhouse is part of an HOA, you’ll want to know what the monthly fees will be and what they’ll cover.
You might ask when the HOA last raised the fee, by how much, and when any new increase might happen. Looking at the HOA’s budget and reserve study could also be a good idea. If the reserves are low, the community is at risk of needing a special assessment.
Shop for a Mortgage and Get Pre-approved
If you’re shopping for a mortgage, you’ll benefit from looking at more than advertised interest rates. You can apply with more than one lender and then compare loan estimates.
You may want to compare the APRs on Page 3: The annual percentage rate reflects the interest rate, lender fees, discount points, and the loan term. If comparing, realize that escrow fees and mortgage insurance can skew the APR.
The loan estimate will also give a monthly payment. To get a sense of what a payment might be with different down payments, you can also use an online mortgage calculator.
By getting mortgage pre-approval, you’ll know exactly how much of a townhouse you can afford to buy, which can give you the ability to bid on a property with confidence and compete with other buyers for a property of choice.
Order a Home Inspection
It’s a good idea to get the townhouse inspected inside and out. Also pay attention to how well neighbors are maintaining their properties.
Buying a townhouse could be a good choice for first-time homebuyers, lawn-mower phobics, downsizers, and people priced out of the larger market. If you decide that buying a townhome is the right choice for you, you’ll probably need to apply for a mortgage.
SoFi is here to answer all of your mortgage questions. And SoFi offers competitive mortgage rates and flexible terms.
Qualifying first-time homebuyers can put as little as 3% down.
Is it worth buying a townhouse?
Townhouses, in general, don’t appreciate in value as quickly as detached single-family homes. But the purchase price is often lower.
Is a townhome a good first home?
A townhouse can be a good first home because of the low maintenance, and amenities may be included. Plus, the price is right for many first-time homebuyers.
Why shouldn’t you buy a townhouse?
Disadvantages can include a lack of privacy and usually a small yard. If an HOA is in place, ongoing fees and rules are involved. Plus, the stairs that come with townhomes may be challenging for some people to navigate.
How do I choose a good townhouse?
When buying a townhome, make sure that it has the features you want and need in a neighborhood where you’d like to live at a price within your budget. If it’s part of an HOA, ensure that the fees are palatable and cover what you expect them to.
Photo credit: iStock/cmart7327
Terms and conditions apply. Not all products are offered in all states. See SoFi.com/eligibility for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.