If you have an FHA loan, you may be running into a lot of difficulty buying a home in today’s hot real estate market. For starters, there just aren’t a lot of homes for sale. And if a home does come on the market, you find out that it doesn’t qualify for FHA. When you finally find a home that does qualify for FHA, the home received multiple offers, and someone else outbids you! What exactly is going on? Here are the reasons why you are having a hard time buying a home with an FHA loan, and what you can do about it.
Some Homes Won’t Qualify (or accept) FHA
The first problem you may be running into is that some of the properties you like may not qualify, or simply just won’t accept FHA. The reason for this is because FHA requires a home to be in what they call “move in ready” condition. While they do not require that the property needs to be newly remodeled, they will not loan you the money if the home has any issues. For example, there cannot be any holes or visible damage anywhere in the home. The heat & electrical need to be fully functional. There can be no broken windows or peeling paint anywhere. There can be no loose handrails. This is true for the home as well as any other structures on the property, such as the garage. If the home is in perfect shape but the garage is falling apart, it will not qualify for FHA.
Sellers Prefer Conventional loans to FHA loans
Once you do submit an offer, you may find that you are losing a lot of multiple offer situations. One reason is because sellers prefer conventional loans to FHA loans. Conventional loans have stricter requirements, so offers that have conventional loans are seen as more stable, and more likely to close. They also close faster than FHA loans, because they do not have to deal with an FHA inspection.
Hard to find a condo that qualifies for FHA
If you are looking to buy a condo, FHA is not the best option for you. For a condo to qualify for FHA, the condo association as a whole needs to meet certain requirements. A lot of condo associations, especially the smaller ones with 6 units and under, do not meet these requirements, or do not want to do what it takes to meet these requirements. Because of this, a lot of condo owners will not consider offers with FHA loans. It just isn’t worth the hassle to them or the condo association itself.
Home requires you to live in the home (no tenants)
FHA requires you to live in the property for at least 1 year. They also require you to move into the property within 60 days of closing. This means you may want to avoid buying any properties that are occupied with tenants. If it is a multi unit property, you need at least 1 of the units to be vacant. If the building is fully occupied, you may have a hard time moving into it.
Tenant’s rights will always come before the owners rights, even if you just purchased the home. The most a seller can do if give them notice to move out of the home. If they don’t move out in time, then you as the new buyer will be in a lot of trouble. If the tenant does not want to move, it can take months to properly evict them, so scratch off any properties are fully occupied if you are using an FHA loan.
What To Do About It
Make sure your realtor researches any homes that you are interested in to make sure it will qualify for FHA. This will you a lot time lost from viewing properties that will not qualify. Remember to stick to homes that are move in ready, and in fairly good condition. If the home gives you any hints that something is wrong with it, such as selling only “as is”, or no pictures of the interior, chances are something is wrong with the home, and it won’t qualify for FHA.
When you do make an offer, remember that sellers prefer conventional loans to your FHA loan. The best way to make up for that difference of to show the buyer that you are more serious about buying the home than anyone else. The best two ways to do this are by offering more money, and not asking for the seller to make any changes (such as small repairs, repainting, etc.) You can also consider offering more earnest money to show the seller that you are serious. Sellers are looking for the most money, and the least amount of hassle. Do this and you may be able to secure the home of your dreams.
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