Buying a Condo or Town Home? Better understand the insurance rules.
Minneapolis, MN: Currently on Condominiums and attached Town home units (PUD), Fannie Mae requires insurance coverage of the lesser of 20% of the unit’s appraised value or replacement cost.
For applications dated on or after January 1, 2012, 100% replacement insurance coverage of the exterior and interior of condominiums, or attached PUD (Town home) units will be required.
If the “master” or “blanket” policy for the condominiums or attached town home development does not provide full coverage of the interior or is a “bare walls” policy, then an individual HO-6 “walls in” insurance policy must be obtained to reach the full 100% replacement requirement.
The owners HO-6 policy must be sufficient to repair the interior of the unit, including any additions, improvements and betterments to its original condition in the event of a loss. The HO-6 policy is required to cover 100% of the insurable replacement cost of the unit’s interior improvements and betterments, including kitchen cabinets, lighting, flooring and plumbing fixtures. This updated insurance requirement will apply to all products and program types including Conventional Conforming, Non-Conforming, FHA and USDA Rural Development loans.
Recent changes in “Fidelity Bond Coverage” has created huge problems on Condo and Town home financing, and this new insurance requirement is going to add another wall to financing these type of homes.
The only saving grace is that for most people, a walls in HO-6 Condo or Townhome Insurance policy should only run +/- about $160 per year.
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