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D, Home Buyer in Minnetonka, MN

What types of problems would make a house fail an FHA appraisal?

Asked by D, Minnetonka, MN Thu May 28, 2009

The house I am concerned about has a poolin the yard where the lining has completely fallen to the bottom and the fence is falling down. On the inside of the house the previous owners started remodeling but havent finished. The floors in both bedrooms are not finished and both bathrooms need serious help. The tile is loose but bathroom is functional. The basement doesnt have any ceiling - the insulation is just hanging down. Will those things make a difference to a FHA appraiser?

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Lenny Frolov’s answer
I would say if you do not disclose you are doing a 203k loan upfront they have a semi-good chance they will cancel on you because they need to be aware of the extra work and time it will take get the deal closed. I think the appriasal would be done after all bids were in.
Web Reference: http://www.lennyfrolov.com
1 vote Thank Flag Link Fri May 29, 2009
Appraisal is done once all bids are complete because appraiser needs to know the cost of repairs and what is being done to determine what the house is worth with the improvements. When you submit an offer you are disclosing the terms of your financing as part of the offer. Not disclosing it upfront is dishonest and might also be a breach of contract... seek legal advice from an attorney if you need it.
Web Reference: http://www.AaronSOLD.com
0 votes Thank Flag Link Fri May 29, 2009
after you submit an offer for a house using FHA financing and they accept your offer. Can you then change your type of funding to add that 203K loan in? Or will the bank cancel the deal at that point? When does the FHA appraisal need to be done?
0 votes Thank Flag Link Fri May 29, 2009
I have had a few lenders tell me lately timelines are up to 5 months for 203k loans because there are just not many lenders doing them anymore. Good luck.
Web Reference: http://www.lennyfrolov.com
0 votes Thank Flag Link Fri May 29, 2009
FHA 203k isn't harder to qualify for but a lot more work is needed before closing... you need bids for the work you are doing, the contractors have to be on an approved list or get spot approval, the underwriting takes longer, etc. You should speak to your lender regarding this but 45-60 days for closing is likely necessary.
Web Reference: http://www.AaronSOLD.com
0 votes Thank Flag Link Fri May 29, 2009
D,
Yes, Aaron is correct, these are the very things that any appraiser would frown on. An FHA appraisal is more stringent because the lender has a higher stake in the loan, meaning, you're only putting 3.5% in yourself, so they have more liability in the property, and that it's a government secured loan.

A 203K loan is not any harder to obtain. There are $15,000 and $35,000 limits on how much you can receive (I may be wrong about those amounts). This amount is added to your mortgage. So, if the house is $100K, it's my understanding that an appraisal would be done to determine a value before and after the fix-ups and your mortgage amount would be based on the value AFTER the fix-ups have been done. The fix-up money is held by your title company and disbursed when the work is completed. The work must be done by licensed contractors. I'm not a lender, so my knowledge about these details is a little sketchy!

Hopefully, some lenders that are more well versed than I on the 203K will chime in here!
0 votes Thank Flag Link Fri May 29, 2009
How hard is it to get an FHA 203K program loan?
0 votes Thank Flag Link Fri May 29, 2009
Yes. Much of that will become work orders. Likely your only chance is an FHA 203k program.
0 votes Thank Flag Link Thu May 28, 2009
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