A Possible Game Changer for Home Buyers:
Special Services Area (SSA)
"It all depends" ...
But when a prospective borrower contacts me as a home buyer, their focus is typically laserlike and on only a couple of things.
They want me to supply them the following information:
- What price range of home they can view with an agent
Unfortunately though, it's not that easy. And the answer to that question is ... you guessed it. "It all depends".
Without a doubt, it IS important to possess that information. But the answer they seek (the price range of home they can shop for)? That dollar figure is arrived at by compiling and analyzing a variety of information. Until that compilation and analysis are completed, a loan officer can not provide a reliable answer to that seemingly simple question.
Adding to the challenge is the fact that, borrowers are in reality being prequalified and approved for a monthly mortgage payment. And there are many variables that can influence and impact that payment.
Those variables are:
- Principal & Interest Payments
- Real Estate Taxes (different for each specific property considered)
- Homeowners/Hazard Insurance Premiums
- Association Dues/Fees to a Homeowners' (HOA) Group
- Private Mortgage Insurance Payments (if applicable)
- Special Service Area Payments (commonly known as S.S.A. Payments, if applicable)
Recently, one of my clients considering the purchase of a home for sale in a nearby community faced the prospect of having an S.S.A. payment included in their monthly mortgage payment. Because an S.S.A. is encountered rather infrequently, the client was caught off-guard as to:
- What an S.S.A. was
- The ramifications of an S.S.A. on their monthly mortgage payment
- How an S.S.A. could affect their mortgage approvals
My client is not alone, so I thought highlighting the existence of S.S.As ... and the ramifications of buying a home located within an S.S.A. ... could be enlightening and helpful to others as well.
Regarding Special Services Area (S.S.A.) ...
Certain housing markets have what is known as a Special Services Area (SSA). They exist where a municipality -town/cities/county has exercised an Agreement for certain isolated developments or subdivisions.
These SSAs were established by a municipal/governmental body overseeing towns, cities, counties, where said municipality funded improvements to a specific development, (such as extensions of sewer and water lines) were needed to accommodate a new subdivision.
Not often utilized, these SSA Agreements allow a development to be built in a municipality/town/city/etc. whereby it may not have otherwise been possible to do so. The typical reason being that the developer lacks financial means (or requested the municipality cover certain development costs) and would not have been able to install and develop needed services (such as sewer, water, drainage, roadways, street lighting, etc.)
In these cases, the municipality fronts the money for the infrastructure improvements being made. The municipality then establishes a "Re-Payment Schedule" for the developer requiring them to make payments over a specific time period, however long that may be until the property(s) is sold to an individual home buyer.
This is where buyers considering the purchase of a home within an S.S.A. must take note ...
Those repayments to the municipality are made in the form of real estate taxes ... taxes that are in addition to the typical real estate taxes owed on the real estate property. Individual homeowners having purchased the properties located within the designated S.S.A. pay these additional taxes.
Developers/Sellers/Builders typically disclose the existence of an S.S.A. (and their resulting payment schedules) either at the time of Contract for Sale of a property ... or if established already, on the Real Estate Tax Assessment or Real Estate Tax Bill.
Again, it should be noted: These (additional tax) payments are payable by the individual property owners within the S.S.A. New Buyers will "inherit" any payments due if buying within an S.S.A. development.
And therein lay the challenge for my borrower ...
As their loan officer, I made them aware that they would have an S.S.A. payment on a monthly basis. They'd have to account for the additional S.S.A. payment within their monthly mortgage payment just as they would their normal real estate taxes, their principal and interest, their homeowners, and any applicable HOA fee, etc.
Some S.S.A. payments can be in the thousands of dollars per year for each individual property owner. The impact felt on a monthly mortgage payment can literally be the addition of hundreds of dollars per month to a mortgage payment.
Such was the case for my client. The impact of having an S.S.A. payment was going to be huge. It was a game-changer for them and their ability to find successful mortgage approval on this particular property. They decided to move on and look at other homes elsewhere.
The above is just one example of why the answer ... "It all depends" is true. Other examples exist.
Each's existence showcases why it's so important to have a proactive conversation with a lender prior to the start of a new home search. Having that conversation will arm homebuyers with the information they need to make wise choices as to the homes they choose to view and buy.
Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf. I'm easily found at:
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