There seems to be an ongoing stigma attached to FHA loans in the local Santa Rosa Sonoma County marketplace. The trend is that FHA loans are difficult to get because of specific property standards. Almost all the time, the property qualifies or the property has some small minor repairs that could easily be fixed prior to closing escrow.
The following text is directly from HUD which inform us which properties will qualify to For FHA financing.”Examples of minor property conditions that no longer require repair include, but are not limited to:
-Missing handrails
-cracked or damaged exit Windows or window glass
-defective paint surfaces in homes constructed post-1978
-minor plumbing leaks
-defective floor finish or covering
-damaged plaster, sheet rock or other wall and ceiling materials in homes constructed post-1978
-poor workmanship
-lack of an all weather driveway
Examples of property conditions that may present a health and safety risks to the occupants of the property include, but are not limited to:
-inadequate access/egress from bedrooms to exterior of home
-leaking or worn-out roofs
-evidence of structural problems
-defective paint surfaces in homes constructed pre-1978
-defective exterior paint surfaces in homes constructed post-1978 where the finish is otherwise unprotected
Additionally, missing appliances that are considered to be normal and customary to convey with the real estate must be included in the kitchen prior to closing the loan.
For rural properties where there is a well/individual water system there is only a test or inspection required if there is knowledge that the well water may be contaminated or if mandated by state and local jurisdiction or if there is evidence of corrosion of pipes and plumbing within areas of intensive agriculture within a quarter-mile. Well inspections are required for new construction properties.
For properties that contain septic systems a test or inspection is only required if evidence of a system failure if mandated by state and local jurisdiction or if customary to the area. Septic inspections are required for new construction properties. With regards to the roof a flat or unobservable roof inspection is not required.”
What are some general guidelines for FHA loans to determine which properties qualify?
Here are some helpful tips to make sure you can get that FHA loan done on the property you would like to make an offer on or are already in contract on.
1.Look for water damage on the ceilings, spotting etc. (if it’s blatantly visible appraiser will likely condition for repairs)
2. Is there a breaker or fuse box? (any open and exposed wires must be corrected)
3. Is there a carbon monoxide detector? (if not one will need to be installed and this usually costs out $15)
4. There must be an operational central heat source in the home. The water heater must be vented and strapped. It cannot contain any leaks. ( if it does contain leaks appraiser will note it in the appraisal for a correction)
5. How does the bathroom look? Is there signs of obvious dry rot and water damage? (if yes appraiser will condition for repairs)
6. Obvious termite infestation? ( appraiser will likely noted on the appraisal and it will need to be cured) Call me on this 707 217-4000.
7. Non-permitted bathrooms or bedrooms in the garage. (appraiser will provide the cost to cure these and will likely not give any value to the area until it is corrected)
8. How is the flooring of the property? (if the flooring is heavily beaten up as described by a licensed real estate appraiser new flooring would need to be installed-no open and exposed sub floor)
9. Is there a pool? (make sure you ask your realtor to ask listing agent if the pool pumps work-if they don’t work, a fence will have to be constructed around the pool as a safety precaution)
Most of these concerns are in lower priced Reo’s in Sonoma County. These things are usually associated with bank owned property and can be sometimes found in purchase prices between $175,000-$250,000. That’s not to say homes above $250,000 will not have these things, but is more common in those price ranges.
The reason HUD has specific property requirements is because any potential health and safety hazards pose a risk to the federal government because they insure and “back” these FHA loans. Learning whether or not an FHA Loan is doable for a property in Santa Rosa or the surrounding areas can be completed by doing a walk-through or emailing Scott Sheldon scott@sonomacountymortgages.com.
What to do if you are getting an FHA loan and you think your property doesn’t qualify?
First of all, you can call your lender or me Scott Sheldon 707 217-4000. Almost all realtors in this marketplace have a general idea of which properties will qualify and which won’t. If you’re doing a walk-through with your realtor at a property there will be almost always tangible signs that repairs will be needed. So what happens when something comes up?
Well, I recently had a transaction where the loan was approved, received the appraisal back and there were paint chips on the side of the house as well as open and exposed wiring. The property also did not have a carbon monoxide detector. After analyzing the appraisal, I called the listing agent and was able to successfully have these repairs paid for by the seller. We got the repairs corrected, then sent the appraiser back out to the property. The appraiser signed off on the corrected repairs. We got the property to qualify and our FHA loan funded. In some scenarios you as the buyer might have to pay for some of these repairs yourself.
We have not lost any loan transactions to date due to the property not qualifying. In every scenario we have successfully been able to get the repairs corrected to obtain financing. We have many happy clients and realtors because of this.
Talk to your lender about FHA loans and learn which properties qualify.
It’s critical to make sure the mortgage lender you are working with is an FHA expert. This marketplace changes too frequently for you to be working with a subpar loan professional. I have over six years of home mortgage loan origination experience and over three years originating FHA loans. I’m also a lot of fun and I’m local in Santa Rosa, CA. I would love an opportunity to show you which properties qualify for FHA loans today.
