Yes, insurance here is expensive because of hurricanes and possible flooding from such storms as find their way in to the Atlantic. The “replacement cost” on the appraisal is what the insurance companies look at when they decide what to charge you.  The appraisal does not go by square footage alone.  Other factors are what the house is constructed of and if it has hurricane shutters and clips.  When purchasing a home, the appraisal will have this information.  It will also have the three different ways the home was valued.    With a concrete, shutterd three unit home the insurance will be over $10k/yr.  Ouch!  That breaks down to about $850/month.  That is on top of the mortgage and taxes.  The different insurance companies do have slightly different rates, so shop and compare.

The bank will require flood insurance for beachfront, waterfront, and low laying areas, or a flood certificate if your home is not in a flood zone.  If you have rental apartments, I would suggest obtaining liability insurance.   Liability insurance does not cost much extra and it is well worth it.

After reading the previous posts, you may be asking yourself, why would I use a lender on island?  Well, you may have to.  St Thomas and the other US Virgin Islands are territories of the United States, not states themselves.  Although the laws and citizenship are US, there are some differences that become more noticable when trying to purchase property here. 

If you have a good relationship with your bank or credit union in the states, or if you own property in the US, you may be able to use a stateside lender.  The problem is that lenders in the states cannot use a property in the USVI as collateral on a loan.  This means you would have to own something in the US of equal value to what you are purchasing in the USVI.  If you default on your loan in the USVI, the lender would forclose on your US property.

Unfortunately when it comes to finding a financial lender in the USVI, there are very few choices.  We have recently had the opportunity to use lenders located stateside that are licensed to practice in the USVI.  That is a welcome change.  Half of the transaction is still on island time, but it seems to move along a bit better.

Buying a first home or a vacation home should be an exciting experience, not one you loose sleep over.  I have been looking for a home to purchase since I first moved to St Thomas in 2004.  I know that sometimes it will be years before you see the home you love.   I will help you find that home in paradise!

Lucky for me a loan officer from another bank came in to my office.  After I told her the story and showed her the appraisal, she said she didnt understand why my 30yr was not approved.  After speaking with her boss, a 30yr mortgage at a great rate would be mine.  Send in the paperwork.  I told her that the only way I could change lenders at this time is if we could close the first week of September.  This gave her just over a month.  She said no problem.

I sent in all the paperwork that was requested.  I mentioned that I would be off island for ten days and anything else they needed had to be submitted before I left since I would return at the end of August and we were supposed to close a few days later.  Upon my return I had a list of ten things the bank needed that were not mentioned before.

After asking many times for a truth in lending statement, I received it Friday September 19, 2008.  Three weeks after we were supposed to close.  Looking over the statement, I noticed the rate stated is one point higher than quoted.  When I asked about the difference I was told that since I was putting it into a trust, they had to charge me a higher rate.  This was not mentioned when I applied for the loan.  

I also wanted to mention that hiring council is recommended here.  There are certain functions that would normally be preformed by a title company or the lending institution in the states that an attorney must preform here.  Inform yourself  as much as possible and stay on top of what is going on.  You are paying these people to work for you.  Make sure they do their job. 

Next…Getting financing from the states 

Every time a lending institution thinks about lending you money, they want an expert opinion that what they are lending the money for is worth the amout they are lending you.  Welcome to the appraisal process.

When in need of an appraiser, I always recommend Appraisal Associates on St Thomas.  The appraiser went to the property to give his opinion on what he saw.  He took measurements of the rooms, rated the condition of the property, stated what the house was constructed of, took in to consideration the area, etc.  Then he researched what other properties are listied for and the sale price of recently sold properties in the area.  In his opinion, the house in question was a two unit property with an accessory room (an extra bedroom outside the two units) and it was undervalued.  In other words, the buyer was getting a good deal! 

At first the bank said we were good to go.  The buyer turned in all requested paperwork.  The buyer was going to get a good rate on the mortgage, and I helped them look for potential renters.  Then the bank said they couldnt get a traditional 30yr mortgage because the house was not zoned for three units.  Fannie Mae had rejected them.  Even after explaining that the third unit was just a bedroom, showing them pictures of the unit, and pointing out that even the appraiser said it was just a bedroom with an exterior door they said Fannie Mae said no. They suggessted a thirty year ammortized, ten year renewable in house mortgage.  Oh, and the loan would be considered commercial property.  This means that the buyers would have to come up with a 25% – 30% down payment (instead of 5%-20%) for a ten year mortgage with payments as if it were a thirty year mortgage, but at the end of the ten years they would either have to pay the mortgage in full or “renew” the mortgage at whatever the prevailing rate was.  The difference between this financing and a traditional ten year balloon mortgage is that if the bank lets them renew there are no closing costs.  This information comes when we have been under contract for almost 90 days and they cannot back out because of financing since the contract states they have 30 days to secure a loan.  MAKE SURE YOU HAVE A COMMITMENT LETTER FROM THE BANK!

Let me start by saying, buying a home here is the same process as buying one in the states.  Oh wait, but it is not.  

As far as I can remember, the lending institutions here need all the same information, they just go about collecting and organizing it differently.  There are a few additional requirements (like hurricane insurance) that were not required in other states I have lived in.  My customer and I have been under contract since February 14th, 2008 to purchase a lovely two unit home on St Thomas.  Today is September 21st and we still do not have a closing date.  Now it is not all the banks fault because there have been some changes and the seller has been slow (very slow) about some items, but I do believe if the banks here had more of an interest in doing things in a timely manner, this would not be taking quite so long. 

The first problem was that the property had three encroachments.  This means that a part of a structure (building, fence, driveway, etc) from one property is actually on another property.  Every time a home or lot of land is purchased in the USVI, a surveyor must go to the property and map the boundries.  According to the original builder of this house, everything was built two feet within the properties boundries, however the current surveyor has said that this is not true, so the present owner of the house has to “cure the encroachments” prior to closing.  Normally a lending institution will not lend you money if someone else can lay a claim on part of the land they are funding.  The present owner of this house was fully aware of the encroachments before listing the property.  In the contract it states that the owner has 60 days from notification to cure encroachments or leins against the property.  The encroachments were supposedly cured and resurveyed by August 15, 2008. 

My buyer could have (in retrospect should have )backed out of the contract after the 60 days.  The problem was that there was not a alot of choice in that price range, they really liked the house, and they could see a lot of potential for improving the property.

So, the next issue… the banks take on the appraisal.

Right now it is hurricane season.  The Louisana coast is getting hit with Gustov and Florida is getting ready for the next one.  The US Virgin Islands are in the hurricane belt.  We have not been hit since 1995 with a big hurricane, but we get some heavy weather even if the big storms dont score a direct hit. 

There are several precautions that can be taken to secure your home.  Hurricane shutters are a must!  They can be simple wooden shutters that are secured from the inside, they can be metal panels that have to be put in place, or they can be the fancy roll down kind with an electric switch. 

Having a generator on property is always a good idea even when there are no storms brewing.  Anyone on island knows WAPA can and will fail at any moment.  I dont even use my alarm clock anymore because I had to reset it 3-4 times a week.  Make sure the generator is powerful enough to run the water pump, the fridge, a few lights and fans, and the stove as well as the electric shutters or gate (if you have them).

Always keep a supply of canned food and fresh drinking water handy.  (I have heard a supply of rum can help 

Dont forget about your pets.  Keeping some extra food nearby for them will be one less thing to worry about later.

Excellent opportunity to purchase a turn-key business.  My favorite bar/restaurant with a large local following as well as tourists.  All equipment and inventory convey. 

Owner will even introuduce you to the regulars and get you started!  A steal at $250,000.