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Some Homes are just HARD!


There are homes that are hard to insure and there are homes that are hard to finance. Homes in flood plains, adjacent to wildfire zones and in the likely path of hurricanes can be difficult and expensive to insure. When fire or wind risk is high, many homeowners wind up having to buy coverage from their states' Fair Access to Insurance Requirements (FAIR) plans, which typically provide bare-bones coverage with high deductibles.

Going without coverage usually isn't an option, since mortgage lenders require homeowners insurance and flood insurance in high-risk flood zones. (The exception is earthquake coverage, which typically isn't required but is a good idea if you have any equity in your home to protect.)

At a minimum, potential buyers should ask to see recent insurance bills to see what they're likely to be charged. Buyers also should keep in mind that if a disaster hits, their premiums could shoot up even higher. After the devastating hurricanes of 2004 and 2005, for example, average premiums for Florida homeowners rose 41%, according to a National Association of Insurance Commissioners study. Average rates in Louisiana rose 22%.

A unique home may stir your soul, but you may have a tough time persuading a lender to give you a mortgage. Even if you succeed, the next buyer may not, which could make it tough to sell the house someday.

Unusual houses -- geodesic domes or homes built from straw bales or old car tires, for example -- can be hard to value, since there usually aren't other comparable properties nearby. Without "comps," it can be tough to find a lender willing to make a loan, even in boom times. When lenders are shying away from risk, as they are now, it can make financing virtually impossible.

Another time it can be tough to get financing: when a condo complex is full of renters. Fannie Mae, Freddie Mac and the Federal Housing Administration have tightened their standards so much that it can be tough to get a mortgage if more than half of a complex's units are rented, rather than owner-occupied.

This isn't a complete list of things that can go wrong with a home purchase. Construction defects, aging systems, broken sewer lines and a laundry list of other problems can cost you big time. That's why it's so important to have a thorough, professional home inspection before you buy, and to make your purchase contingent on that inspection. You should know what you're getting into before it's too late to back out.

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