Financing Tips For Buying A Townhouse

A townhouse is a great option for people who want a step up from a condominium, but who still cannot afford to buy a single family home in the neighborhood that they want to live in. Townhouses offer buyers several advantages including: affordable purchase prices, land ownership, and generally less required maintenance and upkeep. The drawbacks to owning a townhouse will depend on the townhouse that you purchase. Some townhouses will be subject to townhouse owners' association fees and restrictions. If this is the case then your freedom to change the exterior of your home may be limited, and your monthly housing expenses will be higher then if you buy a townhouse that is not a part of an owners' association.

Tip Number 1 for Financing a Townhouse – Know How Much to Spend

When you finance a single family home your monthly housing expenses will generally only include the principal and interest of your purchase, your home owner's insurance premium, and your property tax payment. However, when you finance a townhouse that belongs to a home owners' association then you may also need to pay a monthly home owners' association fee. This fee can add between $50 and $250 per month to your housing expenses. It is important that you factor these fees into your budget before you select a townhouse to finance.

Tip Number 2 for Financing a Townhouse – Know Your Market

When you shop for a townhouse it is important that you know what prices are reasonable and what prices are not. This will help you to avoid overpaying for a townhouse. Agreeing on a price that is too high for a particular property or neighborhood can hurt your chances of being able to secure financing for that property. To avoid this problem you can compare the asking price of a particular property to that of others in the area. Searching an online MLS is an easy way to do this.

Tip Number 3 for Financing a Townhouse – Know Your Options

You need to learn about all of your financing options before you select a single option. Compare lenders, programs, and alternative financing options. Look for the lowest interest rates, the best terms, and the lowest closing fees.

Tip Number 4 for Financing a Townhouse – Know What to Expect

If you are a first time home buyer then you may be a little apprehensive about the financing process. You can alleviate a lot of your stress and you can protect yourself from shady lenders by simply learning about the mortgage process. Learn about mortgage terminology, the steps to completing a mortgage application, and learn about the closing process. Your lender is a great source to tap for this type of information.

Tip Number 5 for Financing a Townhouse – Have Money Available

No matter what mortgage program you select for buying your townhouse you will need at least some money to cover your upfront mortgage expenses. You should plan on spending around $450 for a home value appraisal, 1 percent of the mortgage's value for your lender's origination fee, the first three months home owner's insurance premiums, a prorated amount for the home's property taxes, and money for various other fees and expenses. All of these costs will be in addition to what you will be paying for your down payment. If you would like to get a better interest rate then you can also pay points upfront to decrease your mortgage's interest rate. A point is worth 1 percent of your mortgage's value. If you are self-employed your lender may also require that you have at least 2 months of principal and interest aged in your checking account for 3 months.