Buying a Condo?...You will need supplemental insurance!

In the past, if you needed a mortgage for a condo or townhome, the lender would allow a borrower to get a loan with the insurance that the HOA provided and didn't require a supplemental policy. This "blanket policy" usually covered the entire project and it usually only covered the exterior of the building and not the interior. For example, if the unit burnt down, the insurance would pay to rebuild the structure of the building but the condo owner would have to pay for the interior (e.g. sheetrock, cabinetry, floorings, etc.).

It has always been recommended that condo owners get this extra coverage for the interior but it was never required. That is all changing however and now lenders are starting to require that extra policy to insure the interior (all of my insurance agent friends are very happy about this!). The lenders won't give the loan without it.

I think that it's important that all loan officers are aware of this change so that they can give their clients an accurate estimate of their monthly payments.