anyone else denied FHA loan because of unique property???

Asked by Tshg, Houston, TX Wed Mar 20, 2013

we were set to close on 3/25/2013 but on 03/18/2013 our loan officer called and said that the investors were not going to approve the loan because the collateral was not built out of brick and the comps were, it had been on the market to long and therefore they didn't think that it appealed to the general public, that it was listed on appraisal as a farm house and the comps were ranch style, and since it looks different then the comps they can't place a value on the property. which brings me to the question of what the heck is the appraiser for then??? if the appraiser's opionion of the property is going to be overlooked during underwriting why even order appraisals at all?? yes the house is a bit different but it is located in a rural area, it is not in a subdivision, yes it was on the market for more than 1 year but the seller originally had it over priced at 230,000.00 but when they dropped the price they began getting offers. anyone else go thru something like this?

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Thu Mar 21, 2013
It is critical to understand that just becasue an appraiser completes a report, that does not mean that is acceptable. Brick ranch homes would not be acceptable comps for a two story frame house.

For an appraisal report to be valid, it must contain at least 3 comparable homes that have closed within the last 90-180 days. Should nothing comparable have closed in that time frame, the appraiser can go up to a maximum of 12 months from the inspection date. Often, an additional closed sale will be provided along with 1-2 pending sales or active listings for a total of 6 comparables.

Selection of comps is somewhat subjective based on the appraiser since it really is a judgment call. The best comps will be of similar age, square footage, # of bedrooms/bathrooms, and style of the subject property. At least 2 of those 3 comps should come from the subject property’s neighborhood. One must come from an outside neighborhood to better bracket the overall market area value. Appraisers do need to take into account school districts and city/county boundary lines.

The Appraiser Independence Code is part of an Act that all lenders must follow makes the disputing of a value quite difficult. To make a dispute, the lender must determine that the appraisal report is flawed and has a material defect. This means that comps that are “better” must have been available but not used. Your agent would have to provide these “better” comps to determine if a dispute is justified.

An appraisal cannot be disputed simply because it did not arrive at a certain value. That would be a violation of the Code.

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Prospect Mortgage
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1 vote
Barbara Mart…, Agent, Huntsville, AL
Wed Mar 20, 2013
Yes, Brian and Tammy, I'm a Realtor in Huntsville, AL, and had a deal go south because it was a unique style property. This property had been financed via an FHA loan a few years ago, but HUD's criteria have tightened up significantly. The value wasn't the issue - the style was. Buyer couldn't qualify for any other type of loan, so the deal fell through. Subsequent buyer used Federal Land Bank loan. You might research that. Good luck.
1 vote
Ken Edwards, Home Buyer, Julian, CA
Wed Sep 18, 2013
Holy cow yes! I have been in the loan process for more then two months..three extensions.... five lenders later all of them have waited till the last moment and said: due to the unique nature of the property and no comps available we must reject your loan... the VA apraisal came back 45k higher than the purchase price, but still no bank wants the finance.. I also live in a RURAL area and we have a diverse selection of customs homes. It seems like the banks only want to lend on a house in a cookie cutter development where they can turn the house if the buyer defaults... i dont understand... If there is a bank out there that will lend on a VA loan with a unique design i want to know
0 votes
Debi Broadway, Agent, Huntsville, AL
Wed Mar 20, 2013
Yes, it does happen unfortunately. That process is what's known in the industry as "overlays", in short, even if you qualify and all other criteria has been met, the private lenders have their own "rules" "guidelines" that they follow and the lender has to comply.

I'd talk to your lender about it and see if you can go a different route.
0 votes
Debbie Morris, , Huntsville, AL
Wed Mar 20, 2013
I would check another lender or go conventional rather than FHA. A lender could offer you better information than a real estate agent. This is a very specific inancing question and requires their expertise. Good Luck.
0 votes
Aaron Sims, , Birmingham, AL
Wed Mar 20, 2013
I would talk to a different lender. You should be able to use the same appraisal.
Best of luck!
0 votes
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