We were asked today about the differences in financing in regard to Condos vs PUDs/Townhouses. “PUD” stands for Planned Unit Development.
Ownership & Property Structure
Condo owners do not own the land underneath their units. Many condos, in fact, do not sit on land but “float” on 2nd or higher floors.
PUD/Townhouses always sit on land, as “ground floor” units, and the owners own the land underneath their units.
Financing Differences
Note that many condos look like “townhouses” but are still considered “condos” because of their zoning. They are therefore subject to condo financing restrictions.
In regard to financing the big differences are as follows:
- Condos are NOT eligible for FHA Financing unless the entire condo complex is “FHA approved” (most are not).
- Condos also have slightly higher interest rates if the loan-to-value ratio is over 75%.
- Condo-HOAs (Homeowners Associations) are also scrutinized more closely (with more restrictions) than are townhouse-HOAs.
- Townhouses are always eligible for FHA financing. They are eligible for the same interest rates as any other single family residence, and there is more leeway in regard to HOA issues.
