More Condo Lending Rules - HO6 insurance coverage

We talked earlier about some of the difficulties in financing condominiums these days.  Don't despair.  Since we wrote that, we have financed several successfully.  We should point out one more requirement you should be aware of.  This has surprised some condo owners who are just now refinancing.  Last year, Fannie Mae and Freddie Mac (who own or guaranty almost every mortgage these days) increased the requirement for condo owners to hold what's known as HO6 homeowner's insurance.  Condo owners know that their building is already insured for fire and other hazards by the blanket policy held by the homeowners' association.  However, this policy generally does NOT cover the INTERIOR and contents of each unit.  This includes the interior side of all walls, doors, cabinets, flooring, etc.  The new requirement is that the homeowner must have coverage of 20% of the property value.  On a recent $500,000 valued condo the coverage required was $100,000 and the annual premium was $640.  Although it might seem at first another onerous requirement from these mortgage behemoths, it actually is a good thing for condo owners to protect themselves.  Make sure you consider this before buying or refinancing your condo.