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Again, townhouses are much like condos. Typically, they are described as separate structures sharing similar outside walls. But different from a condo, a townhouse allows you to own the land it sits on as well — a small difference, but a difference nonetheless. Similar to a condo, you need only be concerned with getting a mortgage on a townhouse. You don't have to apply to a board of directors. Townhouse financing is identical to condominium financing. And like condos, townhouses have governing associations.

Townhouses often resemble duplexes — two houses sharing a common, separating wall, with separate utility meters.

Condos, co-ops, and townhouses share similar underwriting guidelines that are distinct from single-family structures, duplexes, triplexes, or fourplexes. Well address the financing options in detail in chapter 3.

A lender may require a condo, co-op, or townhouse to have a majority of its units occupied by their owners. A house wouldn't have that requirement; it wouldn't make sense. A house either is or is not occupied by the owner. If if s not, the lender can ask for more down payment and charge a higher interest rate. With a condo, co-op, or townhouse, if the lender requires that the majority of the owners live in the units and it turns out that they do not, the lender might not make the loan at all.

Or compare a traditional duplex with a duplex that has been converted to a condo. A lender may ask the duplex buyer to put at least 10 percent down to get financing. But if the duplex were a condo and there were two units, neither of which was occupied by one of the owners, a lender again might not issue a mortgage — or may require a much bigger down payment.

Lenders don't really have “special” loan programs just for condos, co-ops, and townhouses. You'll still find a jo-year fixed- rate mortgage or an adjustable-rate mortgage for these types of properties. But they do have special requirements for those associations that must pass muster before that 30-year fixed rate can be had.

Although these three property types are similar to one another, they must be distinguished from a single-family residence when it comes to financing. There are guidelines that must be followed, down payment requirements can vary, and credit requirements can be different.

Because the three property types are similar to one another, throughout this book instead of saying “condo, co-op, or town- house” each time, I'll simply use the term “unit” or “property” when the information can apply to all three. Condos and town- houses are identical in every instance when it comes to financing, yet there are some differences between them and co-ops. When those differences arise, I'll address them specifically.

Knowing how the financial aspect of ownership works is critical before you go shopping. You may find a high-rise condo downtown that's more than 12 stories and want to put zero down. Good luck with that. Or perhaps you're looking at a nice unit near a college campus that rents out to lots of students. Guess what? You could find yourself paying a higher interest rate. Unless you structure your financing the way if s supposed to be structured, you may not even get financing at all.

Financing a single-family residence is simple compared to a condo, townhouse, or co-op. A house needs a qualified buyer, and the property itself must meet a minimum appraised value. Thaf s it. You can move in. But with any of these three property types, not only will the buyer and the property need approval, but the entire project must be reviewed and approved as well. We'll discuss those rules in chapter 5. They include things such as knowing whether or not one entity owns 10 percent or more of the units in the project, whether there is enough money in the Homeowners Association (HOA) budget to cover emergency repairs, or even if the owners of the individual units are behind in their monthly HOA dues.

Financing a house has none of that. And although financing a condo, co-op, or townhouse isn't as daunting as it sounds, these differences are critically important.

This book will give you everything you need to know to finance the condo, co-op, or townhouse that is perfect for you.

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