Townhome vs Condominium

How do you decide if a property is a condominium or a townhome?  A property is not a condominium unless the developer or owner has filed a “Declaration of Condominium” in the real estate records.  The condominium will also need plans recorded identifying each unit.   

Townhomes will normally have a Declaration of Restrictions, Conditions, and Covenants for the development.  

While both the condominium and townhome development will have rules and restrictions for owners, the condominium will also have floor plans of the units recorded in the real estate records.   

Both will identify the property and list the rules for the development, architecture, and will often include parking spaces or anything else that is determined by the Home Owners Association (HOA) or Condominium Association. Both will also have a Common Area that is shared by all the owners of the units or townhomes. 

There are a wide variety of rules for both, and it is a good idea to read through the covenants and declarations before purchasing either one. Many condominiums will restrict the number of rentals allowed in the building, and some townhome neighborhoods are also adopting restrictions on rentals.  

The loan process is different for condominiums, especially if the buyer is applying for an FHA insured loan. For an FHA loan, it really matters how many owners in the building are in arrears on their condominium dues. If too many people are delinquent in their payments, the unit or building may not qualify for an FHA loan. The condominium must also have a certain percentage of owner-occupied units in the building to be approved by FHA.  

FHA requirements for condominiums were updated in September, 2022 to clarify and add structural inspections, insurance, and other requirements to qualify for an FHA loan.   

A person buying a townhome will have fee-simple ownership of the house and the land it sits on. A person buying a condominium will only own their unit and none of the land the building sits on. Lenders treat a townhouse just like any other single-family residence, while a condominium may require some extra work and review to be approved for a loan, especially an FHA loan. 

Buyers should know up front what type of property it is before making any offer.  

John C. Bennett is a real estate closing attorney and owner of Origin Title and Escrow, Inc.. Since 2003, Origin Title has handled real estate transactions – purchases, refinances, reverse mortgages – quickly and professionally. There will be no surprises, nothing misunderstood. Title searches are thorough and well-reasoned, to avoid unpleasant surprises later down the road. Calculate your closing costs in Georgia or Florida using our calculator or contact Origin Title using this form.