Buying with an FHA loan

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Topic: Buying with an FHA loan

Real Estate July 26, 2012 at 3:51 pm

Buying with an FHA loan

My husband and I are ready and able to buy a house in north Petworth if we could use an FHA mortgage (we only have about 5% saved for a downpayment), but we lost another house (in a different neighborhood) due to condition issues, and that was with a conventional loan! I know that FHA loans require the home to be in good enough condition, but nobody seems able to give me a straight answer on what good enough means! I see many single family homes coming up in the $300-350K range in Petworth, and many of them are recently renovated and very nice and liveable, but I guess I’m gunshy from my prior experience. I was wondering if anyone has bought an older, but renovated, home with an FHA loan (especially in Petworth) and could give me some advice. Are houses that are nearly 100 years old just going to have too many issues to close with the FHA loan? Any insight would be appreciated!

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My wife and I bought our North Petworth (7th and Farragut) rowhouse with an FHA loan in October of 2010. Our house was only in so-so condition. It was safe, but it was very “meh” when we moved in. We had no issues whatsoever. I think FHA is basically looking for safety issues. Ugly tile=fine. Hole in 2nd floor floor that goes all the way to the basement /=fine.
Welcome to the neighborhood! 

No one wants to give you a straight answer because they want to be able to deny you for whatever reason they choose.
I bought with an FHA loan in 2009 and don’t remember anything about condition but maybe that’s because my home was in good condition (with the exception of a gaping hole under the kitchen sink exposing all the plumbing).

Thanks guys! Yeah I’m just so confused because on the house we were previously under contract on, they had ‘issues’ with several easily fixable cosmetic things and did not even mention the issues I found more serious (like brick needing repointing and water damage resulting). Like I said it was a private loan but it was similar to an FHA in terms of the downpayment so I just don’t know. Anyways, I hope we can work it out- I just love the neighborhood and am still blown away that we could even possibly afford it! If anyone else has any more advice/experiences I would love to hear!

The other FHA option is to do an FHA 203k loan which allows you to roll the costs to get the house up to FHA minimum standard into your mortgage. This is what my wife and I did. We bought a foreclosed house in northern Columbia Heights in December 2011. The house was not up to FHA standards, so we used a 203k loan to do some renovations (including the nitpicky things FHA is concerned about). A 203k is time consuming and bureaucratic, but well worth the hassle if you can stay on top of the process. The most challenging part of a 203k is that many lenders don’t support this type of loan due to the extra work required on their side. That said, there are some out there. 

You may also want to try other first time homebuyer programs.  I know that BB&T has a program where you put 3-5% down and don’t have to go through the inspection issues that you would with an FHA loan.  Also, there is no PMI so it lowers the fees that you have to pay… I know that other banks also have programs in order to meet their CRA requirements, but they all depend on salary and loan amount.  Just something to look into.  Good luck and welcome to the neighborhood!!

My wife and I recently bought a 100 yr old rowhome in North Petworth recently using an FHA loan. No one then could give us a staright answer on what would be a disqualifying condition for the FHA. That being said, I think it really boils down to a few things from our housing search:

1. Is the house structurally sound? No hidden issues like foundation, termites, mold, water damage/leakage issues

2. Is the house livable? No exposed floors or missing plumbing fixtures, all windows and doors are present, drywall in decent condition, no signs of squatters.

The house we purchased had been renovated about 6 years ago, and was in good but not great condition. However, it passed the inspection and appraisal, and the FHA loan was approved rather painlessly(if you consider 12 late night trips to kinkos painless.)

Anyways, it’s a pain in the ass, but it’s worth it, because North Petworth is a great neighborhood, and you’ll be glad you took the plunge.

Thank you so much for the additional advice! Jim_ed, I’m glad to hear that you guys got approved on a house with a slightly older renovation. I was beginning to think that you had to buy a house fresh from a flipper with brand new granite and stainless steel just to get a mortgage, which seems silly to me. Brightwoodpark, I will definitely be investigating that BB&T loan. I’ve loaned from them before and it was pretty painless so I would definitely go back to avoid that pesky PMI. Ptb22, I have looked into the 203k process, but I find it very intimidating. However, if we find the ‘perfect’ house or a killer deal that just needs a little work we might consider doing the streamline 203k. Thanks again, I am starting to feel much more hopeful about this!

Our experience was also with an FHA loan for a 100 year old row house in Parkview, in Dec. 2010.  It had been renovated maybe a decade or two ago and was in sort of sorry shape (a foreclosure that had seen better days, needed updates and repairs). In terms of condition, it had no kitchen (which was not an issue at all), a hideous bathroom, some evidence of small roof leaks, and evidence of past basement flooding.  The only thing we had to do was make two small repairs at our own expense before closing – 1) there was a hole punched through one plaster wall that had to be re-plastered and 2) ceiling plaster around a stack pipe had failed and needed to be repaired.  Otherwise, it was deemed livable. After that, it was smooth sailing!

Quite welcome. But I apparently always something more to say! … we concur on the price / safety / location compromise.
1. We have a few concerns about that walk too. Do it in daylight / commuting hours, but usually use GA ave / Petworth. Nothing too specific, and I’ve biked it many times, but there’s just a couple of deserted areas.
2. The 70 and 79 buses are invaluable!Quick shots up and down GA ave, including to the metro.
3. I do bike a lot and think it’s a good compromise location in that respect. Reasonable bike ride to Columbia Heights, access to Rock Creek and Met Branch trails. Not a lot of restaurants / bars immediately in the area, but there are a few good ones here and there.
Good luck!

FHA standards in buying a house is pretty straight forward; no peeling paint; no health or safety defects such as a missing handrail.  An FHA appraiser will pick up FHA issues when they do the appraisal and will flag those to the loan officer.  Your inspector should be able to guide you if s/he is well versed on FHA issues. 
I’m a retired DC building inspector (not to be confused with a Housing Inspector) today doing home inspection, 203k and litigation support.  You need more guideance? ask here or email me at [email protected]

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