Know the basics of FHA loan rules and you stand a better chance of selling your house or condo.
Like other areas of Texas, South Padre Island, Port Isabel, Laguna Vista, Bayview and the Laguna Madre area, has buyers that will expect a home inspection, including a form outlining what the inspection revealed.
Making your home FHA friendly will make it more appealing to more homebuyers. Mortgage loans are being insured by the Federal Housing Authority which is used by about 30% of today’s market.
If your house passes the FHA rules, it will lure buyers who are planning to use FHA-insured mortgage. And if it does not qualify for an FHA loan, then you lose 30% of potential buyers.
For first-time homebuyers and those who little budget for down payment, FHA is very important because it allows borrowers with good credit to make a down payment for as low as 3.5% of the purchase price.
Here’s how to make your home appealing to FHA borrowers:
- Know the FHA loan limits in your area
In order for your home to qualify for FHA loan, its listed price should fall within the FHA lending limits in your area. This FHA mortgage limits vary depending in your area. In Cameron County (South Padre Island area) the loan limits are as follows: $271,050 for a single family home, $347,000 for a duplex, $419,425 for a tri-plex and $521,250 for a 4-plex.
- Home inspections
Expect the buyers to conduct a home inspection, whether or not they’re using an FHA loan to purchase the home.
- How much do you have to repair?
If the result of the home inspection shows problems, FHA will not approve until you complete the necessary repairs. Some serious defects are roof leaks, mold, damage on the structure, and pre-1978 interior or exterior paint containing lead.
- Dealing with FHA appraisers
Give the lender’s appraiser a hand. Providing easy access to attics and crawl spaces is one for these are usually required to be photographed, says appraiser Frank Gregoire.
The buyer may opt to hire his own appraiser to assess your home but the FHA only relies on the reports by their own approved appraisers. FHA appraisal preempts the buyer’s appraisal if the two appraisals conflict.
- Help with FHA closing costs
Make your house FHA-friendly by helping the buyers with the closing costs because most of the FHA buyers need them.
Currently, FHA allows sellers to pay for up to 6% of the sales price to help on the total closing costs, but they are considering lowering it down to 3%.
- If you’re selling a condo
FHA has to approve your condo before the buyer can use an FHA loan to buy your unit. The list of approved condos is always updated so check if your association is approved.
Also ask for your association’s delinquency rate. Generally, FHA won’t insure loans in condo associations if more than 15% of the unit owners are late on paying their association fees.
Other rules such as insurances, cash reserves, the number of owner-occupied units, and the types of condos that can be purchased with an FHA mortgage are covered. Sometimes, waivers are issued for healthy condos that don’t meet the regular rules. If you condo is not approved by the FHA, it doesn’t necessarily mean that it has to meet every single rule to gain approval. Ask your real estate agent to consult the local lenders on how to secure an FHA waiver for your condo if it doesn’t meet all the requirements.
Mortgage exposure is also limited by FHA in homeowners association. With some limited exceptions, no more than 50% of the units in an association can be FHA-insured.
- FHA loans for planned-unit developments
For planned-unit developments, FHA does not require the lenders to review budgets and legal documents anymore.