What's the difference between a condo and a townhome?  At first, it may seem that there would not be much difference between the two.  Both condos and townhomes offer low maintenance lifestyles.  Typically, everything in the common areas  (lawn care, swimming pool, fences, parking, ect.,) are taken care of by the association.  In exchange, the owners pay monthly association dues.  However, there are major consideration a buyer needs to take into account when selecting.  The first is ownership.  Townhomes are considered "fee simple,"  which means the owner owns the structure and the land the property sits on.  Condos are not, which means the association owns the structure and the land the condo sits on (Association also owns all of the common areas, including lobbies, roofs, courtyards and windows).  The owner of the condo only owns the inside structure.  This is the reason why condos fees are usually higher than townhomes because there are more common areas to  maintain.   Additionally, the sustainability of the condos really depends on the management of the association.   If the condos are mismanaged and/or become insolvent, the consequences to the homeowners can be devastating.

Another major consideration is financing.  Because a townhome is fee simple, financing is available on it just like any single family residence.   With a condo, the type of financing obtainable will depend on whether the condo is warrantable or non-warrantable or whether or not the condo is FHA approved.   Non-warrantable means the condos do not meet guidelines by Fannie Mae or Freddie Mac.   If you are purchasing a condo which is non-warrantable, you may have put a larger down payment or pay an interest rate above market rate. Loans on warrantable condos usually offer much better rates and terms than loans on non-warrantable condos.  Also if your condo is not FHA certified, you will not be able to use FHA financing.

Therefore, if you are using conventional financing, make sure to ask your Realtor to confirm prior to making an offer, if the condo you are considering is warrantlable or non-warrantable. If you are considering FHA financing click here to find out if your condo is approved by FHA.  Moreover,  keep in mind that the same rules will apply when you go to sell your condo as condos have to maintain their warrantable status or FHA certification in order to keep their eligible status under those programs.