PSA For All Condo Owners!
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Lending wherever you want to call “home” ❤ in all 50 states.

And I’m going to get a little technical, but bear with me. If you own a condo you need to know these details and take action.

Buyers (of course) (always) want the lowest rate and cost when getting a loan to buy a home (thank you, Captain Obvious). The option most buyers (about 70%) chose is a “conventional conforming” loan.

To be eligible for a conventional loan, your homeowners association has to meet certain criteria, set by Fannie Mae and Freddie Mac. If a condo meets these criteria, it’s “warrantable” – if it doesn't, it’s “nonwarrantable”. Although it’s possible to finance a nonwarrantable condo, rates and closing costs are usually higher, a larger down payment may be required or a combination of these factors.

Whether a condo is warrantable or not can significantly impact the value – it’s like your condo is wearing a scarlet letter.

The very best loan – the one 70% of buyers want to use – is off the table. A buyer stuck with a less favorable loan is going to want you to make up for their cost with a lower price.

To protect the value of your home, you need your HOA to be warrantable.

One common problem with warrantability is insurance. Insurance companies have been increasing rates and raising deductibles. A condo becomes nonwarrantable as soon as the deductible for HOA’s insurance policy exceeds 5% of the total coverage.

Changing coverage can take a long time, so do this today:

1. Get a copy of the “Declarations Page” of the “Master Policy”.
2. Find the total coverage and multiply it by .05.
3. Find the deductible. Hint: there may be different amounts for different types of coverage and you need to multiply any per unit deductibles by the number of units.
4. If the deductible is higher than the number you calculated, put insurance at the top of the agenda at your next HOA meeting.

Note: if your HOA has any coverage for special risks specific to your area (earthquakes on the West Coast, lava in Hawaii, ice dams in cold regions), individual owners may be able to supplement the higher deductible with their own coverage. But this isn’t allowed for any of the standard hazards. (Did I mention this gets a little technical?)

Julee Felsman, SVP of Mortgage Lending NMLS 120831
Guaranteed Rate Inc NMLS 2611 Equal Housing Lender.
www.nmlsconsumeraccess.org
www.rate.com/licensing
www.rate.com/privacy

#condolife #mortgageadvice #realestatetips #condoinsurance #nonwarrantablecondo

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Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Guaranteed Rate does not guarantee or assume liability for the accuracy, completeness, or timelines of the information. You should conduct additional research before making any mortgage related decisions. By refinancing, you may pay more in costs and interest over the extended term.