Watch out for these three problematic property types

When shopping on a budget, discount homes may be tempting, but if you’re not careful they may cost you your financing. When applying for a loan, we don’t just evaluate your financial situation. We also assess the property you would like to buy. Some homes will earn you more in the long run, and others have red flags that may require caution. Here are a few examples:

• Non-warrantable condos

  You may think a condo would be cheaper than a house, but financing one considered ‘non-warrantable’ can be difficult, or at the very least, require a larger down payment. Non-warrantable condos are generally condo communities with a majority of the units non-owner occupied. They can be rented out either for the long or short term (as in condo-hotels), or can be commercial spaces. Condo communities that don’t have a healthy financial standing can be hard to finance. Signs of potential financial instability include a large percentage of owners being behind on the HOA dues, the HOA being involved in litigation or if it is a brand new property.

• Fixer-upper foreclosures

  You’ll probably see some fixer-upper foreclosures out there with a 5-figure asking price. Though you may be willing to renovate, securing financing may be a challenge. Condition issues that endanger health and safety can prevent you from getting a mortgage, and the bank in possession of the home will rarely pay for the upgrades needed to bring it up to code.

• Conflicting appraisal

  Your mortgage can’t be more than the property is worth. If your appraisal comes in lower than the amount you need to finance to afford the purchase price, then you may need to find a different option. It is easy to overspend in a hot market. The appraisal should put the true value of the home in perspective.