FHA Approved Properties?

Question

Hi, a friend of mine recently told me that to get an FHA loan on a property, the property needs to be FHA approved.  It is the first time I have heard of it, but I had been under the impression that as long I was qualified to purchase a property of a certain dollar value; and live in it for at least 1 year I could purchase any property I wanted to with an FHA loan.  Does anyone know about this?  Thanks

James Schroeder · Answer

Elizabeth  Colegrove

James Schroeder · Answer

Elizabeth  Colegrove By no means am I professional or anything even closely related to it. I am not trying to break the law nor am I trying to misinform. I was just sharing my limited experience with the VA loan I took.

I looked over all the paperwork I signed and I saw nothing in it stating I could not move out of the property before a year. The only thing I was able to find was that I must move in within 90 days, which I already did. Before I decide to move out I will be speaking with an attorney to ensure everything I do is legal. Additionally, tonight I am going to read over every page of the loan paperwork again and see if I can find anything stating a period of time that the property must be my primary residence.

Elizabeth Colegrove · Answer

@James Schroeder

I wish I wasn't right :( I just know those rules due to having 2 and helping other military members figure out their situation.

Elizabeth Colegrove · Answer

@James Schroeder

I would be VERY careful with that view. My paperwork and EVERYHTING I know about the VA loan contradicts those views.You must move in within 60 days.  You are required to live in the house for one year as a primary unless circumstances changes. Brokers I have worked with have defined the change as being circumstance out of your control, having triplets in a one bedroom apartment, military or other move, etc. No where do I know that being that investing is the reason.

@Devan M. My understand is all personal properties must be lived in for one year unless you are transfer, deployed, etc

James Schroeder · Answer

@Devan M.  To piggy back off @Joseph Zanazan  said.

I just recently did a VA loan and I had the same question as you did as did. I had heard that there was certain period you must live in the house. So I did a little research and this is the only thing I could find, which coincided with all my loan paperwork that I signed. Nothing in my loan paperwork stated that I must occupy for a time period.

You must move into the property within 90 days and your intent must be to live in the house, aka make it your residence. Circumstance change so if you move out a week later after making the home your primary residence you will be ok. As long as the bank can not prove your original intent was to purchase the property and use it for another purpose you are all set.

My plans have change as I become more and more interested in real estate investing. I am thinking of moving out but when I started the process 6 months ago (there was this big challenge with me getting out of the military and working for family) it was not my intent to move out a short after the purchase. Technically I would be clear to move out even though I signed the papers last week. Side note: I was able to get a really good price on the place, which is another reason I am thinking of moving.

I hope this helps out a bit

Joseph Zanazan · Answer

FHA and VA backed loans absolutely do have certain physical requirements called MINIMUM PROPERTY STANDARDS. When applying for a refinance or a purchase, the property serves as collateral. If the borrower stops making the mortgage payments, the lender's remedy is obviously foreclosure. The lender will then sell the house to get back as much of the money it lent as possible. These minimum standards protect the lender. It means that the property should be easier to sell, and command a higher price if the lender has to foreclose. At the same time, a borrower is more likely to stay in a home that meets minimum standards, because he or she will not be burdened with expensive home repair bills from the start. Another thing to consider is that borrowers will try harder to make payments during financial hardship if the home is a pleasant habitat.

There are 3 main categories of standards that are considered requirements:

*Safety - home should protect health and safety of occupants at all times.

*Security - home should protect security of property (security not as in weather or burglars but as in collateral)

*Soundness - home shouldn't have any physical deficiencies that compromise structural integrity.A

An appraiser usually comes out to the property, conducts their inspections and documents all observations and expert opinion. This formal appraisal is what the bank will utilize to make their determination about the condition of the property. FHA will only make mandatory the changes that compromise Safety, Security or Soundness. Most deferred maintenance and cosmetic stuff usually won't impede the process.

Some of the conditions for example would be:

Missing smoke detectors

Unstrapped water heaters vulnerable to earthquake

Missing handrails where they need to be

Cracked or damaged exit doors that are being utilized

Cracked window glass or floors

Plumbing leaks

Asbestos

Rotten countertops

Trip hazards

Defective surface paint

Just to name some of the few, I'm certain there are many more. These will give you an idea about some of the basic requirements. Might seem absurd, but all they're doing is protecting the best interest and the overall integrity of the situation.

Elizabeth Colegrove · Answer

My guess is he is referring to the fact that FHA appraisals have strick guidelines in the "condition". They are the tightest loans. Therefore there is a condition requirement as true fixer uppers usually won't pass.

FHA Approved Properties?

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