Will This Property Qualify for an FHA Loan?

HUD FHA LogoFHA loans can prompt a lot of questions from both home buyers and sellers in Champaign.   Will it jeopardize the sale?  How does the interest rate compare?   This list highlights the most common issues that arise from a home purchase and FHA appraisal.

Every financed home purchase, conventional or FHA, will involve an appraisal by the lending institution.  During a FHA appraisal the appraiser is tasked with looking for safety issues as well as the home’s market value.  When these issues arise, they can become repairs that must be addressed prior to closing.   This list of 10 items is by no means the only things to watch for but they are common issues that arise with FHA financing.  A big thanks to Champaign appraiser Tony Bamert for sharing this info!

  1. Flaking Paint – Flaking lead paint can present a serious health hazard.  Depending on the time of year this can be a simple or difficult issue to deal with.  The solution?  Scrape, prep and repaint the affected areas.
  2. Condition and Estimated Remaining Life of the Roof.  The appraiser needs to have at least 2-3 years of life remaining in the roof.  It’s somewhat subjective because it can be very difficult to estimate the remaining life of a roof.  As a seller or buyer, it will frequently help to have a licensed roofer visit and give their opinion (in a written report).
  3. crumbling-brick-foundationBowed or Damaged Foundation Walls – Pretty obvious what the concern would be here.  If this exists it would need to be addressed prior to closing.  The difficulty is finding a qualified inspector to quickly visit and advise on repairs.
  4. Poor Grading or Drainage Issues – In this instance, the appraiser is looking for conditions that would make a flooded basement or crawl space more likely.  The fix would typically include better downspouts, drainage and improved grading around the perimeter.
  5. Proximity to Gas Stations or Other Hazardous Conditions – FHA does not want to take on added risk with their mortgages so don’t look at that home across the street from the fireworks factory!
  6. Deteriorated or Rotten Siding (especially wood or masonite) – A consistent aspect of the FHA appraisal, they want to make sure the condition and longevity of the home is going to be maintained and is not currently threatened.  If the exterior “shell” of the house is not in good shape you will have a problem.
  7. electrical panelElectrical Issues (open splices/amateur wiring/etc.) – When you are looking at homes and see wiring concerns you can be sure the appraiser will have the same issues.  Get as much info about possible electrical issues before you even write the offer.  You can incorporate repairs into your home purchase.
  8. Working Bedroom Windows – This is another safety issue.  If the bedroom windows have been painted shut or they are just stuck, it will have to be corrected prior to closing.  You would want to enjoy the breeze in the spring and summer anyway, right?
  9. Functioning Furnace or Heating System –  Another obvious one.  Of course you would want this to work properly.  The catch can be a buyer who negotiated a lower price knowing the furnace was out-of-order.  For a FHA purchase you will need to have the furnace working prior to closing.
  10. Shared Driveway Agreements – In the older neighborhoods of Champaign and Urbana, we run into these homes all the time.  Unfortunately, FHA has a much harder time dealing with this setup.  Check with your lender about a specific property prior to writing the offer to make sure it will work for the FHA program.

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Questions about the home buying process?  I would expect so!  FHA loans typically work very smoothly so don’t think that it will be a struggle to get FHA financing.  If these issues exist in the home you are interested in, we can typically work out repairs with the sellers.  Interest rates on FHA mortgages have been incredibly low and they give you a lot of flexibility in your down payment.

If you have specific questions or would like more details on FHA loans drop us a note or call Mark 217-239-7114.

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