Issues that Affect Mortgage Approval for Any Loan
If you own a home that is need of repairs, you may find yourself in a pickle when it comes to finding the right buyer. In many cases following an appraiser’s report, buyers can be denied a loan on a home that requires too much work (if the seller is unwilling to make repairs). And depending on the kind of loan, the inspection will be more or less strict when it comes to repairs required. Here’s a list of some of the more “common” reasons your buyer’s mortgage approval may be negatively affected:
- Lack of utilities: This may seem like a no-brainer, but properties must be linked to public power, water, and sewer. There are also specifications for existing wells, which are tested for lead among other things, and for septic tanks.
- Private roads: repairs needed on private roads can impact the ability of buyers to secure loans. If the home is in an HOA, this is often something covered. But, in other cases, appraisers may make note of repairs needed to the roads associated with the home in order to maintain marketability (and ultimately protect the lender, and homeowner).
- Varying lot sizes: If the home you’re trying to sell is 20 acres, and everything around you is only an acre, your buyers may have a hard time qualifying. Lenders want to finance homes, not necessarily sprawling ranches. But, if you live in San Diego County, it may be safe to assume that this one doesn’t apply (as it’s hard to lock up that much land!).
- Improvements without permits: If upgrades or changes were made to the home that the city deems as “illegal,” then your buyers absolutely will struggle in securing financing. The most common example of this is add-ons or outbuildings that were added to your property without permits.
Depending on what kind of loan your buyer is applying for, approval can be even more strenuous. For FHA loans specifically, the inspection and approval process is strict and rigorous. If you are selling a home that is in need of repairs and the only interested buyers are applying for FHA loans, you may be in trouble. Here’s more about why…
Why FHA Loans Can Make it Difficult for Buyers to Qualify for Your Home
While the FHA loan approval process for certain homes can prove more difficult, there are some things that buyers can get away with such as cosmetic or minor deferred maintenance. These things will be okay by an inspector so long as the wear and tear do not affect safety, security or soundness of the home. On the other hand, the list below consists of items that the FHA loans will not let fly:
- Electric & heating: No frayed or exposed wires, and heating is required in all habitable rooms.
- Bathrooms: Bathrooms must have a shower, toilet, and sink intact. So, if you’re a seller thinking about bringing that fancy tub with you without replacing it when you sell…think again.
- Roofs & attics: This is a big one. The roofing must be expected to last for at least another two years and must keep all moisture out. If not, it’s likely that the FHA will require a completely new roof.
- Water heater: Water heaters simply must meet building codes.
- Hazards: There are a lot of things inspectors can look for under this category, but some items include: proximity to something that could explode, a radio tower, or high voltage power lines.
- Structural soundness: This ties to your foundation and other structural damage that may be connected to things like excessive dampness or termite damage.
- Asbestos: A homeowner’s least favorite word. If asbestos is detected, the FHA will require a further inspection from a certified asbestos professional.
If you’re a homeowner who owns a home that could use a little bit more than some TLC, this could be concerning to you. Buyer financing nightmares are real, and we have worked with many sellers who initially intended to sell their home on the market, just to be snuffed by buyers who couldn’t qualify due to the condition of their home. For some, this isn’t a huge deal because they anticipate and are able to make necessary repairs to get the home up to code or up to the standards of a lender. For others, repairs can be too financially burdensome.
If you have a home that needs a lot of repairs, your best chances to sell are to buyers with:
- A conventional loan (as the standards are looser)
- An FHA 203(k) loan (intended for fixer-uppers)
- A cash buyer (to avoid the hassle altogether)
So, if you’re having trouble getting a buyer to bite due to problem repairs, or they simply won’t get approved to purchase your home- consider consulting with a local cash home buyer. Cash home buyers can purchase without having to meet the needs of any lender, thus making the transaction much more seamless.Views: 8