You have an approved FHA loan. Your realtor’s doing a bang up job of finding you homes in your price range. Still, you’re curious to know if there’s anything else out there. Not sure what type of home condition FHA accepts? Our realtor was kind and patient enough to explain all this to us. There are certain homes you can’t usually get with an FHA loan. Who knew? Trying to sort out homes for sale online? Here’s some tips that may help you when you have an FHA loan.
Check the Finance Options
OK, this may sound obvious. A lot of people don’t realize that some listings actually tell you whether you can use your FHA loan to purchase homes for sale. Read all the details. Be careful though. Just because the homeowner accepts FHA financing, doesn’t mean it will fly with FHA. We learned this the hard way with our first offer. The FHA appraisal will help with this. Unfortunately, appraisals are only done once you make an offer. So how else can you narrow down your choices of homes for sale prior to making an offer?
Look at the description of the homes for sale. Some of them involve a lot of mumbo jumbo, conditions and technical terms, rather than just describing the home for sale. Usually this type of listing on a home for sale is a red flag. You can ask your realtor, but generally, it’s not worth it. FHA only loans money for homes they would want themselves. When looking for homes for sale online, you should skip the ones with the mumbo jumbo, even if you don’t have an FHA loan.
FHA does not do short sales. These may look like a really good deal, but they often take months to go through. What is a short sale? According to Wikipedia, “In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.”
If you have a regular FHA loan, stay away from fixer upper homes for sale. It’s highly likely, they won’t pass FHA inspection and appraisal. FHA is very strict about the condition of homes they will finance. They don’t want to be stuck with a money pit, should you default on your loan. Structural and safety issues are a particular red flag. A weak foundation could leave FHA, you and your home falling flat. That peeling paint could be lead, which requires costly removal. There is a special type of HUD loan for homes that need to be fixed up. It’s called a 203K.
Fix and Flips
When searching homes for sale online, things like total remodel, may sound like a great deal. Use caution when purchasing fix and flips. Often these are done without the proper permits. This can be a real issue when FHA comes in to assess the home. They don’t approve your loan unless the homeowner can prove the job was done right. We found this one out the hard way too. We had a beautiful remodel all set to go until FHA did their appraisal. Surprise! No permits. We could have waited for the homeowners to pull permits and fix what they screwed up but we didn’t want to take a chance on the things the inspectors might have missed.
OK, so all your financing is in place, you’ve checked homes for sale and found the home of your dreams. It’s not a fix and flip or a short sale. It’s not a fixer upper. The listing didn’t contain a bunch of mumbo jumbo. Now it’s time for the FHA appraisal. Believe it or not, the house isn’t yours yet. When you have an FHA loan, it has to be appraised first. If the house appraises well, has no safety issues and comes in at more than what you offered, you’re golden. If it comes in lower than what you offered, you either pay the difference, give up the house or get the seller to lower the price. If there’s a safety issue, you either get the seller to fix it or give up the house. FHA won’t buy unsafe homes or pay for homes that are offered for more than they’re worth.
When purchasing a home with an FHA loan, use caution when making an offer. Check the finance options on the listing. Watch out for the mumbo jumbo when sorting out homes for sale online. Short sales are a big no. Fixer upper homes for sale online or off line are rarely eligible for FHA financing. Watch out for fix and flips. Ask for proof of permits. The FHA appraisal will tell you exactly what homes for sale online are eligible, but do your homework first. You can’t turn back time, so it’s good to know what to look for when searching for homes online accepting FHA financing.