Condo vs townhome: how HOA dues change what you can borrow

Condo or townhome: the short answer

A condo with a lower price can still leave you less room than a townhome when the condo's HOA dues are higher, because lenders count those dues in your monthly payment. That's Fannie Mae's rule for loans sold to Fannie Mae, set out in its Selling Guide. Other programs write their own rules, so ask any lender how it treats dues.

Condo vs townhome side by side

A condo and a townhome go into the same lender math, but a condo with higher dues loses more buying power, and a condo can need its building approved before some loans will cover it. That math is your debt-to-income ratio (DTI): your monthly debts, housing payment included, divided by your gross monthly income. Lenders use it to judge how big a payment you can carry.

On loans sold to Fannie Mae, the Fannie Mae Selling Guide puts owners' association dues and any special assessments into your housing payment, next to principal, interest, taxes and insurance. The Guide never says "condo" or "townhome." It says owners' association dues, so a townhome with dues gets counted the same way a condo does.

FHA loans add a building test for condos. An FHA loan is insured by the Federal Housing Administration. Under FHA's condo rule, the unit has to sit in a project approved by the Department of Housing and Urban Development (HUD) or by a lender HUD has authorized. Otherwise it has to qualify as a site condominium or through FHA's Single-Unit Approval.

How I compared them: by what the lender counts each month, rather than the listing price. Sources: Fannie Mae Selling Guide B3-6-03 for the dues row, and FHA's condo rule, 24 CFR 203.43b(c), for the approval row. The $15,000 figure is my estimate at March 2026 rates, and it moves when rates move.

If you're also deciding between loan types for either home, my FHA vs conventional cost comparison walks through how the two programs differ over time.

How much do HOA dues cut what you can borrow?

By my math at March 2026 rates, each $100 of monthly HOA dues takes about $15,000 off your buying power. The lender adds the dues to your monthly payment before it figures your DTI. A dollar spent on dues can't go toward the loan.

The math scales in a straight line. At $200 of dues, 2 × $15,000 is $30,000.

Treat that $15,000 as my estimate at early-2026 rates. It moves when rates move. Higher rates shrink how much loan each dollar of payment supports, and lower rates stretch it.

Dues are one piece. For the rest of what goes into a monthly payment here, see what sets your payment on a $150K income.

Buying a condo: who it fits, what it costs, what to watch

Who a condo fits

A condo fits a buyer whose counted income can carry the full payment with dues, and who has confirmed the building can be financed. If the condo's lower price more than makes up for its dues, the condo wins.

What a condo costs

A condo costs principal, interest, taxes and insurance, plus HOA dues. On a Fannie Mae loan, the lender counts all of it. Special assessments count too. That's an extra bill the association sends owners, often for a big repair, so ask whether one is planned before you offer.

What to watch with a condo

Watch the building as closely as the unit. If you want an FHA loan, find out before you write an offer whether the project is approved or the unit can pass one of FHA's other two routes.

Some buildings fail the standard rules many lenders use. Lenders call those buildings non-warrantable. A bank saying no to the building doesn't end the deal, because I close non-warrantable condo loans that retail banks turn away.

Buying a townhome: who it fits, what it costs, what to watch

Who a townhome fits

A townhome fits when a condo's dues stretch your budget, as long as the townhome's own dues, taxes and insurance still leave a payment you can carry. If its higher price costs you less than the condo's dues would, the townhome comes out ahead.

What a townhome costs

A townhome usually brings a higher price, so a bigger loan, plus taxes and insurance. Many townhomes have HOA dues too, and on a Fannie Mae loan those dues count the same way a condo's do. Lower dues help, but only if they show up in the actual documents for that home.

What to watch with a townhome

Watch the assumption that a townhome means low dues or none. Get the exact amount for the specific home, and ask about special assessments.

I worked with a family renting a townhome in Eastlake who figured owning was out of reach. They had been comparing their rent to the loan alone. We compared rent to the payment with taxes, insurance and HOA dues on a home nearby. The gap was smaller than they expected, and they bought a townhome a few streets away.

Self-employed? Why HOA dues hit your file harder

When your tax returns show less income than you earn, each dollar of HOA dues takes up a bigger share of the income the lender can count. So a high-dues condo can stall a self-employed file sooner than a townhome would. Write-offs that save you on taxes shrink the number a bank reads.

Your tax returns aren't the only way to show what you earn. I'm a mortgage broker, so I shop one file across a network of wholesale lenders instead of living by one bank's rules. We also close bank-statement and asset-based loans. Different lenders want different deals.

How deposits can stand in for returns is covered in how bank-statement loans work. Questions about which write-offs to take belong with your CPA.

The table below shows the base payment a lender adds dues to. The annual percentage rate (APR) is the yearly cost of the loan, with the rate and certain lender costs folded in.

Example: a $400,000 30-year fixed loan at 6% (6.07% APR) with 20% down ($100,000) on a $500,000 home has 360 monthly payments of $2,398.20 in principal and interest. The APR assumes 0.75 discount points ($3,000, the median paid by 2023 home buyers who paid points, according to the Consumer Financial Protection Bureau (CFPB)) and no other lender fees. Taxes and insurance are not included, so the actual payment will be higher. The rate is the market average for March 5, 2026 from Freddie Mac Primary Mortgage Market Survey; yours depends on your credit, loan and property.

HOA dues aren't in that figure either. On a Fannie Mae loan, the lender stacks dues on top of this base, along with taxes and insurance, before it figures your DTI.

When a condo or a townhome is the wrong choice

A condo is the wrong choice when its dues push your payment past what your counted income supports. A townhome is the wrong choice when its higher price costs you more each month than the condo's dues would. Both cases come down to the same lender math, because Fannie Mae loans count dues in the monthly payment.

Pick the townhome over the condo when the dues gap costs more buying power than the price gap. At early-2026 rates, each $100 of dues is worth weighing against the difference in price.

Pick the condo over the townhome when the townhome's price makes the loan itself the problem. One bank turning down the condo building doesn't settle it, since I place non-warrantable condo loans. If a bigger townhome loan is the worry, read how San Diego's conforming limit sizes the loan.

How I know this

I compare the full payment with dues counted for each home a buyer is weighing, because Fannie Mae's Selling Guide counts dues in the payment lenders use. FHA's condo rule (24 CFR 203.43b) sets which condo buildings an FHA loan can finance. As a broker, I shop files across wholesale lenders and close non-warrantable condo and bank-statement loans. I watched this comparison change a decision for a family renting in Eastlake.

How to choose between a condo and a townhome

The right home is the one whose total monthly payment, dues included, fits your counted income, whether it comes from tax returns or bank statements. These are the questions I'd ask in each situation.

• If your returns run low, I'd compare the condo's and the townhome's payments against what bank-statement income could show, as well as against your returns.
• If the condo's dues are higher, multiply the dues gap by my estimate of about $15,000 per $100 at early-2026 rates, and see whether the condo's lower price covers it.
• If the townhome has dues, ask for the exact amount and any special assessments, since they count the same on a Fannie Mae loan.
• If you want FHA financing on a condo, ask before offering whether the project is approved or the unit qualifies another way under FHA's condo rule.
• If a bank declined the building, ask whether it's non-warrantable and whether another lender takes those. That bank's no is one lender's answer.

My decision rule: a condo fits if your counted income covers its payment with dues and the building can be financed, and a townhome fits if the condo's dues would cost you more buying power than the townhome's price does. If you're self-employed and your returns show less than you earn, test both payments against bank-statement income before you pick. Run your numbers in the free calculator on this page to see what the payment actually looks like for each home, with no credit pull.

Questions people ask