Interested B…, Home Buyer in San Ramon, CA

Can a seller require the buyer to get non-FHA financing?

Asked by Interested But Browsing, San Ramon, CA Mon Feb 28, 2011

We notice some listings specify "conventional" under the terms. We qualify for both FHA and conventional financing, but are leaning towards the FHA loan. If we move forward with an offer and it is accepted, can the seller require that we get conventional financing?

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Some of the bank owned homes and short sale homes will not accept FHA and will only accept Cash or Conventional. FHA has restrictions that would not allow a buyer to obtain a mortgage for some of the bank owned homes. Also there are some condos and communities that FHA will not cover. Although, I have had a buyer purchase a home with an FHA loan and in the MLS it stated Cash or Conventional only.
0 votes Thank Flag Link Mon Mar 7, 2011
Hello Home Buyer-

Sometimes the property can only be purchased with a conventional loan- on some of these Bank owned properties they may be missing appliances or flooring , etc.- so an FHA loan would not 'fly" where as a conventional loan would. FHA loans have much more strict guidelines to adhere to. So to answer your question- the properties condition is what different types of loans will be based on.

Good Luck!
0 votes Thank Flag Link Mon Mar 7, 2011
Interested but...

The key word is required. The situations where I "require" non-FHA is where I know the home will not pass FHA muster. Knowing that a home will not passs FHA guidelines is simply wasting everyones time. In sutuations where the home may pass FHA would be the seller does not with to perform repairs (For example the seller is very clsoe to a short sale and has no cash for repairs.) In most cases FHA is equivalent to conventional.
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0 votes Thank Flag Link Tue Mar 1, 2011
Yes, and sometimes they specifiy that because they know that the home does not meet FHA requirements. For example, if they are investors who bought the property, fixed it up, remodeled, etc, and now are selling it, they may not have owned it for long enough for FHA to be willing to lend on it.
0 votes Thank Flag Link Tue Mar 1, 2011
If you are leaning towards FHA submit the offer that best fits your situation. Many sellers and Realtors assume that an FHA appraisal will be more critical of the property than a conventional appraisal which is not the case in today's lending process. Any appraiser must address all health and safety issues with a property that are evident with an inspection. When a listing is stating no FHA offers ask yourself what is wrong with the property that the seller and agent wish to hide? If the seller will not accept your FHA offer move on there are plenty of properties for sale. Good Luck with your shopping.
0 votes Thank Flag Link Mon Feb 28, 2011
Yes they can , it is part of sales transaction. HOWEVER many sellers don't care happy they received a sales offer

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Mon Feb 28, 2011
Interested But... Home sellers as wellas some realtors believe a conventional appraisal is less lenient than a FHA appraisal. A FHA certified appraisal has to mention in the report conditions of the home that may require them to be rectified PRIOR to closing.
Recent changes to appraisal rules (housing bust and banks/attorneys wanting to place blame) has required appraisors to note issues on a conventional appraisal report as well. These conditions made need to be rectified with a conventional loan PRIOR to closing as well. Appraisors have to make sure a home has running water and a heating system on all appraisal now, which wasn't the case a few months ago on conventional appraisals.
0 votes Thank Flag Link Mon Feb 28, 2011

If you tender an offer with FHA financing the seller can refuse to accept the offer, counter with terms of conventional financing, or accept your offer with FHA financing. Once you get into contract the seller cannot force you to change terms and get conventional financing. However, if you get into contract with terms of conventional financing and then you change it to FHA during the process you could be viewed in breach of contract if the deal falls apart and your deposit could be at risk.

Talk with your agent/broker.

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
0 votes Thank Flag Link Mon Feb 28, 2011
Not likely seller will care as long as you have a solid pre-approval w/ a reputable lender and are able to close without a hitch.
0 votes Thank Flag Link Mon Feb 28, 2011
The seller cannot dictate what type of loan you get; however, the type of house may. If the house is in bad shape, it may not get approved by FHA. FHA has their own appraisers, who also inspect for major issues. Also, just because a listing doesn't say FHA, doesn't mean the house won't qualify for FHA. Talk to your agent to make sure.
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0 votes Thank Flag Link Mon Feb 28, 2011
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