FHA Loan Options for Bargain Home Listings
Not that you cannot find a bargain home, but there are some caveats to keep in mind when house hunting for a home to buy with an FHA mortgage loan.
FHA Home Loans Require an Appraisal
The appraisal issue is important when it comes to bargain home listings because you may find some properties are priced lower due to their condition.
A home that is “repairs required” is not an automatic barrier to an FHA mortgage, but you need to know which FHA mortgage loan option might be best given the nature of some types of homes.
FHA Loan Options for Bargain Homes That Don’t Meet FHA Appraisal Requirements
Some borrowers will look at a home they want, but know that the condition of the property may make it unsuitable for an FHA mortgage with appraiser-required corrections or repairs.
But when you buy a home using an FHA Rehabilitation loan rather than a typical FHA 203(b) “forward mortgage”, your fixer-upper project is no longer a liability where home loan approval goes.
Borrowers may also be able to get an FHA rehab loan for homes secured by FHA mortgages that are foreclosed upon and are being auctioned/sold as “REO” properties. Ask your participating lender about this possibility if you need to purchase a fixer-upper property.
FHA loans are possible for properties that don’t pass the appraisal if there are recommendations to correct such issues. A home that needs roof repair, replacement windows or doors, etc. may be considered for a FHA loan because these corrections are feasible and not unreasonably expensive compared to the other expenses related to home ownership.
Always Pay For a Home Inspection
If you find a bargain home in your chosen real estate market, it’s crucial to heed the advice of the FHA, HUD, and home loan experts and pay to have the property evaluated by a trained home inspector. A bargain home may have issues lurking within its’ walls (or elsewhere) that are not caught in the appraisal process.
Buying a home without a home inspection is the same as purchasing a car without test-driving it. Even though the inspection is technically optional it is definitely something every borrower should do.
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