I wanted to clarify a couple bullet points regarding FHA financing in 2010. Please feel free to email me back with any additional questions you may have about being an FHA buyer or reviewing an FHA offer as a seller:
Minimum down payment- If you follow my updates you know that in 2009 a client could put 5.10% down (versus the standard 3.50% down) on an FHA loan and avoid the dreaded “review” appraisal. As of January 1st, 2010, review appraisals on FHA loans are not part of the process unless an underwriter identifies other red-flags on the property. Your client can put 3.50% down with our worrying about a review appraisal or additional underwriting requirements. In order to move away from FHA financing, clients need to gather 10% down for a single family residence or 15% down for a condo.
Termite Reports - Per FHA guidelines, a termite report and/or repair work for section 1 is not required if the termite inspection and/or termite work is specifically countered out of the purchase agreement, the appraiser does not note extensive termite damage in the appraisal report, and escrow does not accidently forward a copy of the termite report to the bank. If the bank does receive a termite report (even in error or for informational purposes only) – the lender will require work to be completed. If you have a deal where termite is not going to be part of the transaction, please ensure it is countered out of the termite report up-front.
Water Damage- With mold damage being a hot-button item over the last few years, water damage can create serious hurdles in closing an FHA loan. Be sure that any evidence of water damage has been sealed, covered, and re-painted. $20 worth of paint, caulk, and an hours worth of work repairing exposed traces of water damage can save a deal. If an appraiser on an FHA deal notes any potential water damage, the underwriter can condition for mold inspections, extensive repair work, and even structural integrity reports. Avoid this hassle by having the seller repair water stains or traces of water damage before an appraiser inspects the property.
