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For FHA underwriting purposes, what is he difference between a condo and a townhouse?

by lisa789 from Pembroke, Virginia. Nov 16th 2015 Reply


Ray Stevens (Direct_Lender)
#223 ranked lender in Florida - 3 contributions

Yes. A condo usually has to be on FHA's approved condo list. There are new changes coming through soon that may relax some of those underwriting requirements. Condo questionnaires have to be completed by the management association. There cannot be an excessive amount of units being rented out. There has to be some reserves held by the association. There can't be units rented out to the general public on a daily, weekly or monthly basis. There can't be any pending litigation. There are other guidelines, these are just some of them.Townhouses don't require the same level of scrutiny as condos. No questionnaire to complete and there is no "List of Approved Townhouses" to check. A townhouse purchase is definitely easier to approve by a lender.

Nov 16th 2015
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Derick Condron (rightstartoregon)
#32 ranked lender in Oregon - 598 contributions

The quick answer is a townhouse you own wall to wall. Condo you own the air in between the walls.

Nov 16th 2015
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,722 contributions

A "True" townhouse is nothing more than a single family home in a planned unit development (PUD) community.. it might have a shared wall or very small lots, but with a townhouse you own the building and the dirt it sits on, and for underwriting purposes, it's no different than a single family home.. Be cautions.. there are condo developments that call themselves townhouses. A condo is a building where you only own the "Walls In" meaning you don't own the exterior, roof, or the dirt it sits on.. For condo financing, the development must be approved for FHA financing. Although FHA has announced some relaxed guidelines for approving condo's, I've looked over the changes, and it's a pretty insignificant change that will have little affect right now.. possibly in the future they will add even more relaxed guidelines, but right now it's not much different than it's been. If a property is FHA approved, then the majority of the lenders will do FHA financing on them, but some will have overlays (additional guidelines above what FHA calls for) and will scrutinize the condo questionnaire. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Nov 16th 2015
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