Wednesday, August 25, 2010

Why Condition, Location are Key for FHA Home Buyers

Why Condition & Location is Key for FHA Home Buyers
Now that FHA loans are again a hot item, particularly with first time home buyers, there are a few things you should be aware of. First, the condition becomes very important. In order to obtain an FHA loan, the property must be appraised by an FHA appraiser. An FHA appraiser must disclose any “inhabitable conditions” in his/her appraisal. Once and inhabitable condition is disclosed, it must be repaired prior to the close of escrow before FHA will fully approve your loan.
Here’s a practical example. Let’s say you found a house for sale in San Jose but it was missing a toilet or a light fixture (I took this pic while recently previewing a home for an FHA buyer). This would be considered inhabitable and would have to be repaired before closing on the purchase of that home. Another inhabitable item an appraiser would cite (and I’ve had this happen to me while working with other FHA buyers) is a missing cabinet door in a kitchen. I’m not sure how they consider this inhabitable, but they didn’t ask me my opinion but merely gave me the rules to abide by. Where it can get sticky is when you want to buy a home but don’t’ know what will be called out in an appraisal. You make an offer that the seller accepts only to find out that repairs need to be made that were not part of the original contract. If a repair agreement cannot be reached with the seller (and if your offer was properly prepared) you should be able to walk away from the deal and get your deposit back. Unfortunately, that money you spent for the appraisal or any inspections is gone.
Another issue that pops up on home purchases with FHA loans is the location. If you are buying condo, the complex must be FHA approved. There are places you can go to find out if the complex you are interested in approved, but always check with your lender before writing an offer because condo complex FHA approvals can and do change. I would recommend to buyers with FHA loans that you understand what you can and cannot do BEFORE you start investing in appraisals and inspections. For more info send an e-mail to me through my website

Gary Nobile has been a licensed Realtor in Santa Clara County for over 20 years and serves on the Board of Directors of the Santa Clara Chamber of Commerce. (408) 247-4029