Vacation-home buyers are finding it harder and harder to finance their purchases, even with good credit and a healthy down payment. In some cases, the culprit behind their lenders’ skittishness is not even a poor market, but the state of the local homeowners’ association (HOA). Lenders in areas where property values are still uncertain due to distress, blight, or high levels of foreclosure, are looking farther afield than the address of the intended purchase in order to make a buying decision. If the local HOA is in bad shape financially, a vacation-home loan could be a no-go even if a buyer has “stellar credit,” reports the National Association of Realtors (NAR). Financial issues in the HOA, a high percentage of existing owners being behind on their HOA dues, or several unsold homes in the same area can all ruin your chances at financing your vacation home.
Mortgage lenders also say that they are concerned these days about underwriting in unstable areas where housing prices have not yet leveled off or recovered to some extent. They do not want to underwrite mortgages in areas where prices could fall farther, thereby eliminating the value of their collateral on the loan. The state of an HOA is a good indicator of the health and desirability of a neighborhood or condo group in many instances, which is likely why lenders are taking such a close look at the associations these days.