Purchasing Different Types of Homes

How to handle the purchase of three main housing types: single-family homes, condos and townhouses

Americans have a variety of different types of homes to choose from when they are looking to buy a new place. From modest mobile homes to palatial gated communities, there's something to suit the diverse tastes of homeowners. When it comes to financing and insuring these housing types, you'll need to understand the subtle differences between them. But, for the purposes of exploring your home purchase options, let's consider just three of the main types: single-family houses, condominiums and townhouses.

Single-family homes

According to the U.S. Census Bureau, single-family homes represent the majority of the housing market with about 60 percent of all homes in the country. Because a single owner controls the entire structure and the land upon which it's built, buying a single-family home is usually the most straightforward transaction of the three. As the sole borrower, lenders will only be concerned with your credit history and the credit history of your spouse if both names are on the title.

The mortgage process will begin when you complete a mortgage application. The lender will process the loan and compile necessary documentation, such as an appraisal, home inspection, title search and other legal documents. Then, you'll set a closing date.

Condominiums

Condominiums are co-operatively owned housing types, where individual homeowners are integrated into a community with unique legal stipulations. Individual condo owners own their own interior space, but the walls, exteriors and the land the condos are built on are jointly owned by the condo association. Some complexes look similar to an apartment building, the only difference being the residents own their space rather than rent it. Others are 'detached condominiums' like a gated community where owners are not responsible for the exterior maintenance of the home or yard. In this case, an elected homeowners association (HOA) manages the upkeep of the condominiums.

With condos, lenders must take into account not only your individual situation with respect to income, credit history and current savings, but also the health and finances of the HOA before approving the loan. Most lenders won't lend to so-called non-warrantable condos. This is in part because government housing agencies such as Fannie Mae and Freddie Mac don't guarantee them. Non-warrantable condos don't meet basic minimum requirements like resident control, upkeep of routine maintenance, major repairs, utilities, occupancy rates and other factors. You'll want to make sure that the HOA for the condominium you're looking at has a strong financial history and maintains their property well.

Townhouses

Another home purchase option is a townhouse. Like a rowhouse, a townhouse shares a common wall with its neighbor but is otherwise similar to a detached single-family home. A townhouse shares characteristics with each of the above housing types. Townhouses comprise about 5 percent of the nation's housing stock. Some townhouses have joint, condo-like ownership structures. Others are available for individual purchase. You'll need to be clear on which ownership structure is in place before you buy. If there is no condominium association, you should check with a legal originator and your insurance agent on the implications of sharing a wall with your neighbors.

Consider these different types of homes for a permanent residence or vacation home

When you're thinking about buying a vacation home, any of these home purchase options could work. While the same lending considerations mentioned above will apply, you'll also need to give some thought to the possibility of being a landlord. If you plan on renting the property to tenants when you're not using it, you will need to consider the responsibilities that come with renting your house. You'll be responsible for repairs and managing the seasonal schedule for renters. You may even want to consider hiring a crew to clean and maintain the home if you don't live in the area.

Find out more about financing different types of homes with Citizens Bank

When you're looking at different housing types, it's important to consider how your financing options may be affected by the different ownership structures. For information specific to your situation, speak to a Citizens Bank home loan originator at 1-888-514-2300 who can help you decide which home purchase options are the best for you to consider. If you're ready to start a mortgage application today, you can always do that too.

 

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