What is a townhouse? – Forbes Advisor
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It’s important to consider all of your options if you’re looking to buy a home. This includes looking at different types of homes, such as townhouses. Although these types of homes resemble traditional homes, they may offer some exceptional features, such as access to community amenities.
If you’re wondering what a townhouse is and if it’s a good fit for you, here’s what you need to know.
What is a townhouse?
A townhouse (also called townhouse) is usually a unit of at least two stories in a row of several that shares one or two walls with another unit next door. It may also share other features like courtyards and amenities, although it usually has its own entrance. This type of home is generally smaller than traditional single-family homes.
Although stand-alone homes can be close together, note that a home is not considered a townhouse unless it is side-by-side with another unit. Also, although a townhouse is in a row of adjoining units, each unit is privately owned and may be part of a homeowners association (HOA).
What is the difference between a condo and a townhouse?
While condos and townhouses are usually individually owned, a condo is more like an apartment. Condos are located in a building with other condominiums above and below, often in complexes that contain several of these buildings, sometimes in a gated community.
However, unlike an apartment, a condo is owned as a single-family home or townhouse and can be sold or rented by the owner. An apartment, on the other hand, is owned by a landlord who typically owns all the units in a complex and rents them out to individual tenants.
Condos also tend to be smaller than townhouses, though they generally offer more shared amenities like fitness centers or pools.
How much does a townhouse cost?
Although townhouses are generally less expensive than single-family homes, that doesn’t mean they’re cheap. For example, you might end up paying more for a townhouse in Brooklyn than a single-family home in Dallas.
Ultimately, the cost of a townhouse will depend on a wide variety of factors, including:
- Location (city and subdivision)
- Market demand
- HOA costs (if applicable)
- Financing possibilities
- Amenities included
Also keep in mind that your costs will vary depending on whether you choose to buy or build a townhouse.
Advantages and disadvantages of buying a townhouse
As with other types of real estate, buying a townhouse has its ups and downs. Here are some pros and cons to keep in mind as you weigh your options:
Advantages of buying a townhouse
- Can be cheaper than a traditional house. A townhouse is generally less expensive than a freestanding single-family home, although this ultimately depends on location, market demand, and amenities.
- Eligible for mortgage financing. If you need financing to buy a townhouse, you’ll follow the same steps and be able to choose from the same types of home loans as if you were buying a single-family home. For example, you might consider a conventional mortgage or a loan backed by the Federal Housing Administration (FHA), US Department of Agriculture (USDA), or Department of Veterans Affairs (VA).
- Amenities generally included. Depending on where you look, many townhouses offer a variety of amenities. For example, a property may have access to a clubhouse, swimming pool, and exterior maintenance.
Disadvantages of buying a townhouse
- May be part of an HOA. If you choose to purchase a townhouse that is part of an HOA, you will need to follow the association’s guidelines regarding the exterior of your home. You will also have to pay an HOA fee that goes towards maintaining the community, which can range from $100 to $1,000 or more per month.
- Less privacy. Detached single-family houses, even if they are close to each other, are separated by individual walls. Townhouses, on the other hand, are connected by at least one wall for corner units and two walls for intermediate units. This means your neighbors will have closer access to your life (and vice versa), whether you like it or not.
- Less accessible. Townhouses are multi-level buildings with at least two floors. If you need more accessible accommodation without stairs, you’ll want to consider other options.
How to buy a townhouse
If you want to buy a townhouse, follow these steps:
1. Review your budget
As with buying any type of home, you’ll want to check your budget first if you’re considering buying a townhouse. Although townhouses tend to be less expensive than freestanding structures, you will likely need to take out a mortgage to finance one. As such, you’ll need to ensure that you’ll be able to reasonably afford monthly payments as well as additional expenses such as homeowners insurance or HOA fees without overstretching yourself.
You can use our affordability calculator to estimate your payments and get an idea of what you can afford.
2. Decide what you want
While your budget is your financial guide, it’s also important to think about your “must haves” when shopping for a townhouse. Here are some questions to help you think:
- Do you want to live in a gated community?
- Do you want to control your lawn maintenance or other household needs?
- Would you rather have your own personal pool or a community pool?
- How many cars do you have and do you need multiple parking spaces?
- Do you have limited accessibility that prohibits you or your family from crossing stairs?
- Is being part of an HOA a problem?
- Are you ok with sharing walls with your neighbours?
Although this list is not exhaustive, answering these questions can help you decide which type of home is best for you.
3. Compare lenders and get pre-approved
It’s better to find a house based on the price you can afford than to fall in love with a house you can’t afford. So if you need a mortgage to finance a townhouse, it’s a good idea to start shopping around and comparing your options with multiple mortgage lenders early in the process. Consider prequalifying with several lenders to see the loan amounts you could possibly get and to narrow down your choices.
Later, when you find a townhouse you want to make an offer on, you might want to consider getting pre-approved from your lender of choice. To do this, you will need to provide financial documents and undergo a thorough credit check. If you are approved, you will receive a pre-approval letter with the loan amount you qualify for. Sellers often prefer to see a pre-approval letter when it comes to getting offers, so having one on hand can help speed up the process.
4. Explore the neighborhood
It’s easy to fall in love with a space on a leisurely afternoon guided tour. But you’ll want to get a more complete look at the living space and neighborhood before making any decisions. For example, consider potential noise from shared walls and explore common areas like a gym or swimming pool.
You might also find it helpful to walk around the neighborhood and chat with your potential neighbors. Ask them what they like and dislike. See if it’s a place you can imagine yourself living.
5. Make an offer and close the townhouse
After you find the townhouse that suits your needs, make an offer (with the help of your real estate agent, if you have one). If the seller accepts, you will need to get final approval from your lender, which may involve providing additional documentation.
Once everything is in place, you can then proceed with closing your new home. Be prepared to review your closing disclosure, pay your closing costs, and obtain all keys and copies of documents you need.
Is a townhouse right for you?
Whether a townhouse is right for you will depend on your situation and preferences. Buying a townhouse can be a good decision for first-time home buyers or those looking to save money. But if you need more space or don’t want to share the walls with your neighbors, you might want to consider other options.
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