Home Buying in Denver>Question Details

Amber, Home Buyer in Denver, CO

How strict is FHA when it come the condition of a home?

Asked by Amber, Denver, CO Mon Jan 3, 2011

I was reading in the California Q&A that FHA wanted a seller to paint a door before the would approve the loan. My husband and I are wanting to buy a home in the next few months and after browing quite a few homes I don't think with our price range (90,000 - 100,000) we can find a home in perfect condition. Can someone please provide with me some basic guidelines as to what is acceptable and what is not.

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Amber,
I have helped many buyers over the last year buy homes in that lower price range. As for the FHA guidelines, you've received some pretty good answers from some of the mortgage brokers who have answered your question. Most of the homes that I have sold to my buyers needed some work but I just closed on one last week for $109k that was a fully remodeled fix and flip property so it needed virtually nothing! So, don't dispair or be concerned about having to buy a wreck of a property in your price range. There are some nice homes available and I know we can help you find one of them. I'm happy to provide you with the my buyer's name and number who just bought the home that I told you about. I'm also happy to send you properties that are in that range for you to view online.
Let me know
Mike Papantonakis
Remax Alliance
303-913-9129
0 votes Thank Flag Link Wed Jan 5, 2011
Most of the answers on here sound advice. Don't get discouraged by what seems strict. In this buyer's market, most retail sales (not foreclosures) are putting the burden on the seller to make the home marketable. The determination for what is acceptable to FHA is made by the appraiser. Most offers I write are contigent on the home inspection, the appraisal being acceptable and financing being approved. Use this to your advantage. You will negotiate the lowest price you can and then ask for general repairs that were found on the home inspection. You then use the FHA appraiser to leverage more repairs without it looking as though your buyer is being unreasonable. This can be a huge asset when getting a new roof or other high dollar repairs that the seller would balk at if you were asking without it currently being an issue (ie. not currently leaking but being very aged).

Its true that the seller is not obligated to do the repairs, even repairs as required on the appraisal, but in a buyers market, they have more to lose than you do.

If they are unwilling to do the repairs, you can still fall back on the 203k. It takes a little longer, but truly is not difficult when working with an experienced loan officer that knows this product.

Good luck and happy home hunting!
Mark Atteberry, SG Priest Realtors, Louisville KY Home Expert
0 votes Thank Flag Link Tue Jan 4, 2011
Usually FHA does want the home to be in livable conditions. The FHA loan understand that 1st time home buyers might not be in the condition to buy a house and face major repairs right up front.

The house must not represent any health or safety hazards. The way the bank investigates the condition of the property is base on the reports ordered during the transactions and also by any negative comments or recommendations made by the appraisal. If the price range that you can afford is giving you trouble because of the condition of the property I will recommend that you look into a the possibility of purchasing a town home, they are usually located in good neighborhood, surrounded by nice homes for a lot less than the price of a regular home sometimes even with bigger square footage and with the same benefits of the schools and general area. I hope this helps with your questions. Good luck with the purchase of your home.
ps. Also keep in mind that if this is your 1st home you can always move in 5-7 years, but in the mean time you can start with a town home and move up into a house later when ready.
Web Reference: http://www.eastbayhomes.com
0 votes Thank Flag Link Tue Jan 4, 2011
Amber,

Around here it is there must be plumbing, toilet, kitchen sink, furnace are some of the things that if they are missing or broken fha will not approve these are sometimes missing from foreclosed homes. Your loan person should be able to provide you with guidelines.

good luck,

vera
0 votes Thank Flag Link Tue Jan 4, 2011
Well, for someone that sells many homes I can definitely tell you that FHA loan requirements are strict. Sometimes I have to walk with a note pad to write down all the things the appraiser is going to report to the bank, but it depends on the condition of the home.

Dependin on the home the seller will most likely be faced with additional expenses for repairs and or replacements to do painting, electrical, plumbing, roof, windows, exterior repairs, termites and more. But don't get discouraged because even though FHA is making it a little harder and it may take a little longer, it will only benefit you because you will get a home in much better condition at the end.

With FHA loans you need to work with an experienced agent that can negotiate the deal, find licensed contractors if necessary to have the seller make the repairs and keep the deal alive.

I hope I helped you understand the FHA standards, if you have any questions simply email or call me.
Web Reference: http://www.RhondaHolt.com
0 votes Thank Flag Link Tue Jan 4, 2011
HI Amber,

While FHA/HUD does have guidelines for minimum property standards, there is no real reason to be majorly concerned with them, because you can always use an FHA 203k loan which allows you to do the repairs AFTER you own the home.

-----
203kContractors.com®
Contractor Directory for the FHA 203(k) Loan
(480) 463-4663
Web Reference: http://203kContractors.com
0 votes Thank Flag Link Tue Jan 4, 2011
Hi Amber,

I have put together a handout which I have linked below which highlights the property condition items which FHA appraisers consider. If there's something specific, let me know and I can research it.

If the property is a Condo, it's important to confirm it's on the FHA approval list at
https://entp.hud.gov/idapp/html/condlook.cfm

Even with it being on the approved list, it doesn't guarantee it's still eligible. Today we're seeing more complexes with over 15% delinquency on HOA dues which we confirm in a condo questionnaire as part of processing the loan. Helpful handout link:
http://www.hud.gov/offices/hsg/sfh/condo/factsheetconsumerco…

Here's another link on HUD's website regarding property condition requirements
http://www.hud.gov/offices/hsg/sfh/faqs/atl1val.cfm#anchor77814


Good luck and let me know if I can help further!
0 votes Thank Flag Link Tue Jan 4, 2011
Roof , and foundation are the 2 major problems have any loan declined.

Any home MUST BE MOVE IN QUALITY

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Tue Jan 4, 2011
FHA has softened its approval guidelines....the home must be "safe, sound, secure" so if they deem anything "unsafe in the property or jeopardizing the structure or security" of it they will call for a correction. Some things on the list are:
Peeling paint, broken windows, termite damage/infestation, plubming leaks, exposed exterior surfaces, reoof issues, garage door openers, exposed wiring, safety hazards, pool/pool equipment, deferred maintenance"
Also, the 203k is a wonderful option as long as the house appraises and the repaired value.
Good luck!
Laura Myers
Keller Williams Az Realty
480-600-6213
0 votes Thank Flag Link Tue Jan 4, 2011
Thank you very much for your answers everyone. We were considering a 203K loan but the more I read the more complicated it seemed, just buying a house with a regular FHA loan is enough paperwork. Maybe we will have to re-consider though.
0 votes Thank Flag Link Tue Jan 4, 2011
Hi Amber,

When you get the desired home appraised, the lender will let you know what they want done (if anything). If they do request something, odds are that they will want it completed before giving you the loan

Thanks,

Ethan Besser

Ethan Besser
Broker Associate
Keller Williams - DTC
Cell: 303.856.8980

http://www.RealEstateColoradoNow.com
0 votes Thank Flag Link Tue Jan 4, 2011
.Hi Amber,

Most of these answers are along the same line. FHA wants you to have a safe house. This means the systems must be functional - electrical, plumbing, heat, water heater and roof. Peeling paint is a concern for FHA because of Lead Based Paint for homes built prior to 1978. If it was built more recently, they want the peeling paint fixed because without it, the wood or raw surface will deteriorate.

Minor health and safety issues can usually be completed with a regular FHA loan with a repair escrow. If the items are outside of the repair escrow guidelines, a 203k is the best solution. It also allows you to finance elective changes - like updating the kitchen or flooring.

You CAN do the work yourself with a 203k or repair escrow, but we need to budget for a contractor in case you get hurt or can't complete the work. Please visit my website or give me a call to learn more. We'd be happy to help you get prequalified.

Matt
0 votes Thank Flag Link Tue Jan 4, 2011
I would second the 203k home loan route - if FHA will not approve a loan. The only drawback with 203k is that you yourself cannot do the work; it must be done by qualified contractors. My guess is that they don't want people taking the extra money and then buying a boat with it.

The appraisor is the person at FHA that will determine if any work needs to be done. On the last house that I sold (fixer upper with FHA) the appraisor wanted splashblocks on the downspouts for the gutters and a new roof. The seller had to put on a new roof.
0 votes Thank Flag Link Tue Jan 4, 2011
Some basic guidelines for you to look into when in the homes. Anything that is of major health and safety FHA will want corrected. Things like peeling paint, roofs needing replaced, not having a functional bathroom to name a few.

But one common misconception is that if there is missing carpet or missing appliances you can't get an FHA loan. This is not true. What will happen is the underwriter will want to see that you have enough money to buy the appliances and replace the carpet. If you have nothing saved for these items, an underwriter could be concerned.

But in those types of situations there is also an FHA 203K loan that allows you to finance in the cost of certain improvements when you buy the home. Check out http://www.fhacolorado.ord/fha203k for more information. If you have more specific questions feel free to let me know rwilliams@summit-mortgage.com.

Sincerely,

Ray Williams
Branch Manager
Summit Home Mortgage
Denver
Web Reference: http://www.fhacolorado.org
0 votes Thank Flag Link Tue Jan 4, 2011
Fha is after getting you a safe home and limiting future major repair concerns. On hud.gov you can find a list of conditions generally needed to comply but this is a lender concern for the most part. There are many houses that might not meet the conditions and typically the seller wont repair them if they are marketed" AS IS".
Your lender and your broker should be able to tell whether they meet such criteria.
As always . Matt Ackerman below is a hud loan expert and is used to this question often...You should call him direct...he is a great resource.
0 votes Thank Flag Link Tue Jan 4, 2011
FHA wants homes that you can "live in" No peeling paint, broken windows or the such. The FHA appraiser will call these out. There are many homes that will go FHA that some think wont. Try the HUD homes also.
Brian
0 votes Thank Flag Link Tue Jan 4, 2011
Hello
You may also look at HUD properties which have the property condition pre-done. They have a new website http://hudhomestore.com and you can search for properties, then click on Addendum for the report. Look for PCR (property condition report) and you are looking for lots of 'yes'. If there is an amount in Escrow, that will tell you what also needs to be done.

It is possible - I am going out today with some Buyer's who ae in the same position as you and we have a lot of properties to look at.

You also need a good Lender who knows what they are doing. I have a couple of gems if you need someone.


Let me know if you need anymore help, or if would like a free search of properties? You can also look on my website

Julie Reddington
720 226 4168
0 votes Thank Flag Link Tue Jan 4, 2011
The home does not need to be in perfect condition, but it will need to be in reasonably good condition. If you find something that needs work, however, you can also consider an FHA 203K loan in which the bank lends you the money to buy the home and also the money to do repairs. There are more than one type of 203K loan, one for smaller amounts that allows the homeowner to hire contractors through their local home improvement store (Talk to your agent about Lowe's Realtor Benefits) and ones for larger amounts where the homeowner will work with a licensed and approved contractor to do bigger jobs like the roof. Either way, FHA is a very good option for most buyers. Just explore all options.
0 votes Thank Flag Link Tue Jan 4, 2011
Hi FHA buyer. FHA does have a minimum standard. Generally , all the mechanicals must be in working order, no pealing paint. There is an FHA standard in carpet (new) as well. Carpet providers know exactly what it is. It is basically a minimum weight. FHA has another program that allows you to buy a substandard property. It is a 203K program. 203K loans the purchase price plus the amount to fix up the property. The loan is based upon the appraisal value after the repairs. Not all lenders are FHA approved, and some who are, do not loan on the 203k program. You'll have to find a "direct endorsement FHA lender that is also approved for the 203K. God luck, God Bless and good hunting.
0 votes Thank Flag Link Mon Jan 3, 2011
Amber,
The web reference below has your answer in detail. The short answer is that FHA wants the home to be habitable, safe and complete for the new borrower. What you are describing was most likely as a result of an older home with peeling paint that could be lead based paint.

When I am shopping for a home with buyers that are going to get an FHA loan, I look for a functional roof, running water, functional appliances, all windows intact, doors that lock...etc..... In short, it does not have to be perfect but the guidelines want the home to have all functionality and lower risks to the buyer (and lender) at closing.

Listing agents specify in the MLS if a home will likely pass FHA criteria. Its a not a guarantee but a good starting point as you search for your next home. Best of luck with your search.
0 votes Thank Flag Link Mon Jan 3, 2011
Amber-
Unfortunately there is not a published list of items that are not "allowed" to be insured by FHA but suffice it to say that peeling paint, broken windows will complicate/kill the purchase. i just had one fail due to a crack in the patio...
Choosing a HUD home, homepath home or using a 203K loan might be your best option in this price range...You may also wish to simplify and consider a townhome...
Give me a call and we can get you moving in the right direction
Kimberly Ryan
303-523-8333
http://www.SwanRealtorGroup.com
0 votes Thank Flag Link Mon Jan 3, 2011
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