I have been told by a realtor that it is not possible to get a mortgage on a foreclosed home that is not technically move in ready, is this true?

Asked by hunnibunni87, Monroe, GA Thu Nov 29, 2012

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Thu Nov 29, 2012
No, that is not true. While it may not meet the minimum property standards for a regular conventional or FHA mortgage, a Renovaiton mortgage is an option for many buyers.

As one of the largest direct lenders in the country, Prospect Mortgage offers one of the largest selections of loan programs available. In addition to the standard conventional, FHA, VA, USDA, and Jumbo, we also offer a wide range on Renovation loan programs. Our Renovation programs include FHA 203K (Streamline & Consultant versions), HomePath Renovation, and HomeStyle Renovation.

For the FHA 203K program, some lenders only offer the Streamline FHA 203K. That does not give you any options should you encounter the need for the Consultant version for structural repairs or if you are looking for renovations in excess of the Streamline’s $35,000 limitation. Working with a direct lender who offers bother the Streamline and Consultant versions is very important.

For HUD’s Fiscal Year ending 09/30/12, Prospect Mortgage was the 2nd largest volume FHA 203K lender in both the country and the Metro Atlanta market. At Prospect Mortgage, we have a dedicated operations center that only handles our renovation mortgages.

Selecting a loan officer that knows the program inside and out is the key. If your loan officer is not experienced in closing a lot of these types of mortgages, then it will be a very challenging experience for you. Allow an average of 45-60 days for your 203K closing. Prepared buyers are often able to close sooner than that. Some have closed in under 30 days when they are very prepared.

All renovation work will need to be completed by a licensed and insured contractor. I have heard that some lenders may require the use of certain contractors. At Prospect Mortgage, you are free to use any contractor that you wish that meets the minimum requirements as we do not maintain any type of approved contractor list or provide contractor recommendations.

Other than for appliances in certain situations, you may not use any of the big box retailers (i.e. Best Buy, Home Depot, Lowe’s, etc). This is because they will not sign any of the HUD required 203K contractor forms.

Use of a HUD Consultant is required on the Consultant FHA 203K and highly suggested on the Streamline version.

Getting Pre-Qualified is the only way for you to find out your options. To get Pre-Qualified for your purchase, you can submit your request online at http://www.rodneymason.com.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing
2 votes
Michael Hamm…, Agent, Suwanee, GA
Thu Nov 29, 2012
I would pay close attention to Rodney Mason's thread, hunnibunni87. It's not pulp fiction. Thumbs up. Please call, text or email if we can provide further assistance. Good Luck!

Michael Hammond





1 vote
Ron Thomas, Agent, Fresno, CA
Thu Nov 29, 2012
Not true at all:
Some Lenders have requirements as to Heath & Safety.
Some Lenders will not lend if the Appraisal notes a lot o work needed, which lowers the Appraised value.
But some Lenders have special loans that will give you money to re-hab the place first.
You probably should talk to some Mortgage Officers before you go any further; particularly if you have already found a place and want to make an offer on it.

Good luck and may God bless
1 vote
Jmusgrave, Home Buyer, Monroe, GA
Thu Aug 11, 2016
NO not true.

In fact there are loans that are available for first day out of foreclosure, or for flippers. These are 7/1 or 5/1 ARMs but you want to re-finance after one year so you do not see our rates rise. Realtors nor the government can judge what is "move -in". Various. What HUD will not allow is a loan that the appraiser says has safety issues. These would fall back on Bank, because "as is" does not mean you can cause physical danger for occupier and face civil as well as criminal charges
0 votes
Solomon Gree…, Agent, Duluth, GA
Fri Nov 30, 2012
The type of sale, foreclosure or not, does not matter. The first thing to consider is the type of loan that you are using to make the purchase. There are minimum property standards based on the various mortgage programs. If you are using an FHA, USDA or some other mortgage product, search "Minimum Property Standards" at HUD.gov to get an idea about the expectations that most lenders will have for property conditions. If the property that you had in mind does not meet those standards, programs such as the FHA 203(k), FHA 203(b) for HUD-owned properties, the HomePath Renovation Mortgage for Fannie Mae-owned properties and others are available to bring properties into compliance.

While certainly not all inclusive, some of the requirements that come to mind right away

-- No broken windows to the outside
-- Doors to the outside must work and lock properly
-- No wall holes (interior nor exterior)
-- There must be a working heating system supplying the entire property
-- Water supply must have access to a heat source
-- No safety hazards (protruding nails, loose deck planks, etc.)
-- No exposed electrical outlets (outlet and switches must be covered by wall plates)
-- There must be adequate attic insulation

Should you proceed, please be sure that your offer includes a finance contingency, advising the seller that you will proceed with the the property purchase "IF" financing can be obtained within a certain time period. .

Appraisers are the lender's objective eyes with regard to property conditions and we are fortunate to have Hank Miller, a broker and appraiser, as a major contributor on this board. He'll be a great resource for you.

I hope that helps.

Good luck
Solomon Greene
Brokers Associate, Certified Affordable Housing Counselor, Certified Distressed Property Expert, Lawrenceville REALTOR®
Keller Williams Realty Atlanta Partners
(678) 775-2677
0 votes
Robbie Thomas, Agent, Monroe, GA
Thu Nov 29, 2012
That is not true, there are certain types of loans that you can't get. On the other hand there are types of loans that you CAN get. One that you can get is an FHA 203(K).
Just read Rodney Mason's reply. He probably knows more about it than any Realtor.
0 votes
Chuck Green, Agent, Norcross, GA
Thu Nov 29, 2012
Talk with Rodney or your chosen lender to make that determination....if you have the credit qualifications you should be able to move forward if the repair amounts fall in line with the rehab mortgage guidlines....

Web Reference:  http://chuckgreen.com
0 votes
Sandra Shurl…, Agent, Monroe, GA
Thu Nov 29, 2012
It depends on what they are claiming it needs. Most require there be a stove and the heat and air unit in tact. I generally ask my prefered lender if the home qualifies. Hope that helps answer your question feel free to contact me with any other questions. Sandra@GeorgiaRealtyFinder.com
0 votes
Suzanne MacD…, Agent, Succasunna, NJ
Thu Nov 29, 2012
Yes and no. It depends on the type of mortgage, the down payment amount and the specific condition of the home. The FHA will not guarantee a mortgage unless the home is in relatively good condition. Conventional mortgages are more lenient but require a much greater down payment. The way to get around both of these is to apply for an FHA 203K loan, which combines the purchase price and the cost of repairs/renovations. Depending on what needs to be done to the home it can be a 'streamline' loan ($35K of less in repairs) or a full fledged 203K loan. The interest rate is a little higher, but you can also do a 'streamline' refinance after the repairs are completed and lock in a lower interest rate. I am surprised the realtor didn't mention this to you as an option.
0 votes
Laquita Baez, Agent, Atlanta, GA
Thu Nov 29, 2012
A 203k type loan or conventional loan may be your options.

Laquita Baez
Licensed Realtor in GA and NJ
Better Homes and Gardens Real Estate Metrobrokers
0 votes
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