With a co-op you don’t own your own unit. Instead, everyone who lives in the co-op pays to become a shareholder in the entire collective of units. As part of your shareholder status, you get access to one of the housing units. This means that a person who lives in a co-op unit is not actually an owner of the unit. Therefore, a co-op unit is not real property. This unique arrangement makes co-op loans even more complicated than condos. The same issues apply to co-ops as to condos — inadequate reserves, damage to the property, people not paying their dues, etc. — but with the added difficulty of navigating how to mortgage property that isn’t tangibly real in the eyes of the law. As such, many lenders simply refuse to lend on co-ops. Co-ops are just too complicated. If your buyer is buying a co-op, make sure your lender is well-versed in co-op loans or you might not even make it past the origination stage. Rural Properties: While the USDA provides very favorable loan terms for houses that are in rural areas, rural properties can still be challenging to finance. One of the main reasons it’s difficult is because it’s harder to get insurance. For example, a rural property is often far away from the local fire station. This puts the home (and the residents) in considerable danger, because if the home catches fire it is more likely that it will not survive. If the lender knows that the borrower will have issues getting insurance, the lender is going to be more hesitant about approving the loan. The loan officer must know how to deal with and resolve those kinds of issues. Fortunately for you buyers and real estate agents, I am a licensed and experienced insurance professional, with access to multiple property insurance carriers that provide different types of property coverage and policies.
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