Looking for a relatively affordable property? Let’s hit the town. For many buyers, a townhouse is the sweet spot in real estate. But what is a townhouse? It’s not a detached single-family home, but it isn’t a condo, either. Let’s see how townhomes stack up.
What is a Townhouse?
A townhouse, or townhome, is distinct among the different types of homes. It is defined as a single-family unit that has:
• Two or more floors
• A shared wall with at least one other home
• Ownership that differs from a condo: You own the inside and outside of your unit and the land it sits on, whereas a condo owner owns the interior of the condo
The meaning of the word townhouse can be traced back to 19th century England. The rich and royalty would have a large manor in the country but also a home “in town.” The definition has evolved over the years. A townhome doesn’t need to be a second home, and it doesn’t even need to be in the city. In some parts of the U.S., townhouses with a similar design and facade are also called row houses.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Pros and Cons of a Townhouse
Townhouses come with a fair share of benefits, but like any home, it’s not one size fits all. Consider these pros and cons of buying a townhouse.
Pros
• Makes the most of space. As townhomes share a wall or two with neighbors, and are often in densely populated areas, they use space efficiently.
• Affordability. Because of their shared walls and space-saving layout, townhomes are often more affordable than single-family homes in the area.
• Independence, with less maintenance. Townhouses usually have less upkeep than single-family homes. There might be a small yard, and your own roof, to maintain.
• Lower property taxes. A townhome owner may pay less in property taxes than the owner of a standalone home.
• HOA perks. Some townhomes are part of homeowners associations. If amenities like a pool, gym, and maintenance of common areas and possibly your own little yard are a priority, a townhome with an HOA could be a good fit.
• Looser rules. The HOA rules may not be as strict as those for a condo.
Cons
• Limited landscape options. Townhouse lots are small. If you want space for landscaping, it’s unlikely you’ll find much with a townhouse.
• Uncreative exteriors. If the townhome is part of an HOA, the ability to decorate the exterior of the unit could be limited. Townhomes typically look very similar to their neighboring units as well, so standing out could be a no-no.
• Stairs, stairs, and more stairs. Townhomes have an efficient build for spaces where land is at a premium. That means building up, not out. A townhome may have three (or more) floors, meaning climbing stairs repeatedly.
• Less privacy. Townhouses have at least one “party wall,” or wall shared with another property. That could be a problem for buyers who prioritize peace and quiet if the neighbors are loud.
• Less appreciation. As a rule of thumb, townhomes don’t gain as much value as single-family homes do.
• HOA fees. If the community has an HOA, it will charge a monthly or quarterly fee to cover communal perks. The fees usually rise over time, and can be high at a complex full of amenities.
Finding a Townhouse
Finding a townhouse will depend on where a buyer is looking. Most commonly, they’re encountered in densely populated areas where land might be pricey and scarce. The search may be more restricted if a buyer wants to purchase a townhome in an HOA community. One place buyers typically won’t find townhomes is in rural or secluded areas. Land may be more affordable and plentiful, which means properties don’t need to be condensed.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Who Should Get a Townhouse?
A townhome might be the right option if the buyer:
• Isn’t interested in much maintenance. Maintaining your unit and your parcel of land will almost always be less intensive than maintaining a detached single-family home and yard. If there are HOA fees, they might include landscaping services.
• Is a first-time buyer. The lower cost and maintenance of a townhouse might be the right fit as a first-time homebuyer learns the ropes of homeownership and looks into homeowner resources.
• Is an investor or buyer of a second home: Both may see the benefits of a townhouse.
• Is on a budget. Generally, a townhouse will cost less than a single-family home in the same area. Buyers could live in a desirable area without paying top dollar. (A calculator for mortgage payments helps buyers see the effect of different down payments.)
• Wants to live in an urban or suburban area. Because townhomes are built in areas where space is at a premium and the cost of living is high, a townhouse could be the right fit.
The Takeaway
With less maintenance (and potentially a lower price tag) than a detached single-family home, a townhome can be a great opportunity for buyers. Townhomes qualify for the same kind of mortgages that detached single-family homes do, and they require less exterior maintenance than a detached home. So there’s a lot to love about living in a townhouse.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How is a townhouse different from a house?
The biggest difference between a townhouse and a detached single-family house is the shared walls. A townhome may have one or more “party walls” with the properties adjacent to it.
Do townhouses have backyards?
Some townhomes may have a small backyard or patio, but that’s not a requirement for a home to be considered a townhouse.
Can you get a loan to buy a townhouse?
Yes. Similar to purchasing a traditional single-family home, townhouse buyers can use a home loan to purchase the property.
Photo credit: iStock/JARAMA
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.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
SOHL0124016
