FHA vs. Conventional When Buying A Foreclosure
There are several different things that affect you as a home buyer when purchasing a foreclosure or for that matter a traditional home. I thought it would be worth mentioning the difference between FHA financing which is a government loan in a conventional loan which you typically get through any local bank.
With a foreclosure, the lenders want the least amount of hassle as possible with selling the home. It was up to them, they wouldn't have to do a single thing to prepare the home for sale. Sometimes they will fix items or add appliances and carpet. But they typically don't like to make any repairs once the home has been placed on the market.
That's why typically a conventional loan works better for a when purchasing a foreclosure versus an FHA loan. The FHA loans always have more things attached to them. There are certain criteria that has to be met for the bank to lend the money with an FHA. Because an appraisal can flag some of these items, banks are less likely to accept an FHA offer. Some of the common items that get flagged are; cracked window or chipping and peeling paint. There are many others but those are the two most common. In the scheme of things they're very minor but because it's a government loan, they take it very seriously. If it's a home built before 1978 there's a very good chance that there is lead-based paint in that home. Even if it's been covered up. If they see chipping paint they're concerned a child may eat the paint chips and develop lead poisoning. So they require those types of repairs before they will loan the money.
It's important as a potential home buyer that you are aware of these types of things that can come up. The other side of the coin is many times even if the repairs come up, the bank will fix them. That put you in a precarious situation because you want to purchase the home, you don't mind repairing those things yourself yet you can't get the loan if those things are prepared before closing. This is where having a good real estate agent comes into play. Someone who is representing you will help to work through that and work with the listing agent to try to get an exception and get you into that house.
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