FHA Loans and “As Is” Properties

The days of multiple above list price offers are slowing down and a whole new potential group of homebuyers are emerging – those wanting to use FHA financing.

But what if the home is marketed “as is” – does that leave potential offers out in the cold? Does this mean the seller has to take a lower priced conventional offer? The good news is not necessarily! 

Your clients may be concerned about accepting the FHA offer because they don’t want perceived inspection issues to slow up the selling process, or they might fear the buyer’s financial backing isn’t strong enough and don’t want to put any money into possible repairs. When it comes down to decision making, they rely on your advice, so let’s give you the facts.

First, a common and incorrect stigma is that FHA loans are only for buyers with poor credit and are unlikely to get approved.

At Key Mortgage, FHA loans get approved at the same rate as conventional loans and can often offer more financial flexibility for the buyer. 

The second most common stigma is the property condition passing an FHA appraisal inspection.

While decades ago this might have been the case, FHA has streamlined the appraisal process narrowing in on only health and safety issues that many times would be addressed in a conventional appraisal as well. For example, the most common requirement that deviates from a conventional loan is the need for lead based paint that is peeling to be scraped and repainted on homes older than 1978. Think of how much housing inventory was built AFTER that which would never be subject to this.

Addressing the reason(s) the seller wants to sell “as is” is an important factor in choosing between the FHA, conventional or cash offer. If the seller knows there are major repairs needed or safety issues such as structural issues, leakage, or mold, neither an FHA or conventional  loan will allow you to close until those items are addressed. If they are concerned about a stove burner, a loose railing or a non-GFI outlet that can easily be remedied and will cost them less than say a lower conventional asking price, FHA may be the way to go. 

At Key Mortgage we provide a thorough review of each buyer’s available financing options and work as a team to determine what has the best outcome for all parties. Not all lenders approach the process this way.

Contact your Key Mortgage loan officer to see how partnering with them can give your buyers the advantage and your sellers peace of mind.

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