Condo Financing Challenges

Condo-Financing

Whether you want to avoid the exterior maintenance a single family home requires or simply prefer a compact living space, there are many reasons to consider a condominium when buying real estate. When the housing bubble burst and property prices fell, condo units were among those that fell the furthest—and they’re recovering at a slower pace than their single family neighbors in many parts of the country. While this may be bad news for those who bought at the height of the market, it is great news for anyone considering a purchase today—if you can get financing.

Before approving a condominium mortgage, a lender must scrutinize the complex and association in addition to the buyer’s finances and credit history. This can make the transaction more difficult than that of a single-family property purchase.

For example, a lender that is considering financing a condominium will require the association to provide information on the number of owner-occupied and bank-owned units. Lenders also request data on association reserve levels and the percentage of homeowners behind on payment of HOA fees. If any of these details fail to meet their loan approval requirements, they may deny your mortgage application.

Insurance is also important. Lenders require condominium associations to have enough property and casualty insurance to cover risks according to the lender’s guidelines. If the association needs to increase their coverage, it can delay your loan approval. If the lender requires an increase and the association refuses, they will deny your mortgage application.

FHA loans require an additional step for conventional financing of a condo unit. Fannie Mae or Freddie Mac must approve the condominium building or complex for financing. If the property you wish to purchase has not already been approved, the process required for doing so can delay the approval of your mortgage.

While condominium financing may present additional challenges, it is not impossible. You should prepare yourself for a longer application process, but don’t be deterred if you’ve determined a condo property is right for you.

The Home Warranty – Is It Worth It?

Is a Home Warranty Worth It?

Home_Warranty_PolicyIf you buy a new computer, stereo, flat screen TV, cell phone or almost any other electronic device, the cashier at your retailer of choice will likely ask you if you’d like to protect your purchase with an extended warranty. While doing so can be a wise decision-perhaps your home is full of rambunctious Rottweilers who frequently destroy your belongings—that added protection comes at a price. Home warranties do as well.

A renewable service contract, the typical home warranty covers at least a portion of the costs of repair or replacement of covered items within a home. This can range from standard appliances such as dishwashers, furnaces and air conditioners to major systems such as plumbing and electric. Depending on the level of coverage selected, you may pay as much as $500 annually. That’s usually in addition to fees for service calls on any filed claims.

Is a home warranty worth the costs? The answer depends—at least in part—on whether you intend to buy a new build or an older property.

New Build – Many new builds come with builder warranties that cover structural defects. Because the appliances and systems are new as well, they should be free of problems. In the case of a dishwasher with drainage issues or a refrigerator that’s more hot than cold, you can likely get a replacement from the manufacturer. Unless you’re a true Nervous Nelly, it makes sense to skip the home warranty and put your money into emergency savings instead.

Older Home – While rich in character and history, older homes are more likely to have defects. Before purchasing one, ask about the exact age of the appliances included in the sale and service paperwork for all the major systems. A home inspection is essential to determine if costly repairs or replacements are likely. If they are, the benefits of a home warranty may more than outweigh the cost of the annual premium.