No Carpet, No Kitchen, No Loan!
In light of the changes in conventional financing guidelines, FHA loans have once again become a popular choice for home buyers. In the good ol days, (heck, that was just a few years ago) almost anyone could get 100% financing on practically any home. Not so, today!
Today’s savvy buyers understand the market leans in their favor. However, financing may not. While showing homes in the last few weeks, buyers who are looking for a deal and most are – find the deals may have faults which prevent traditional financing.
Little faults, like – no kitchens – seriously, a bank owned home with the kitchen stripped. No cabinets, no countertops, no sink – dishwasher, stove -gone! This was a lovely house and a great price, but the average home buyer has no chance of having their loan approved by FHA or conventional, according to my lender. Of course, this buyer was going to go FHA with 3.5% down or conventional with 5% down. In either case, the bank would not approve a loan for the home without a kitchen.
A few more homes later, another problem, no carpet. Again, FHA will not finance without flooring. It’s a livability issue! I’m sure it also has to do with the bank wanting some security that the home they finance will indeed be livable and once they hand over the funds, they have no idea if the homeowner will have the repairs completed.
These homes can be financed with an FHA 203K loan, which allows for the buyer to include the cost of repairs into the loan and all projects completed by an FHA approved contractor. The process is a bit more difficult and time consuming, and comes with a higher interest rate, but is a good alternative to turning down a home which is priced right for the repairs needed. While finding deals may not be difficult, financing may create a roadblock.
This is just one of many reasons a home buyer should know their financing options upfront!