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What does it mean on a listed property when it says no FHA or Va loans?

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June 09 2009 - Tucson
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Answers (15)

While there are many reasons the property could be listed this way only a handful of these reasons are reasons the FHA/VA financing may not be permitted but most of those items would make the property unfinanceable under any circumstance unless a private lender/portfolio lender was offering funds.

As long as the property can be repaired and made habitable, the property can obtain a rehab loan (203k streamline/full, HomeStyle, HomePath Renovation).  Often times I'll see "cash only" at auctions because they'd rather get a quick buck for the property instead of top dollar (some of the auction house's clients want/need their cash right away, not 30-60 days from now).

There are MANY loan officers like one down this thread that are under the misconception these loans are impossible to close and terrible for the consumer.  Any REO agent or  any agent in the know, in general knows the value of a rehab loan product and gladly embraces another tool to make a happy buyer or sell their client's home.

It's true some companies can't close a loan (especially a 203k) to save their life these days which is why it's best to seek out best rehab specialist you can find (whether that person be local or across the country) since they probably work for a company that caters to this product.  I won't name any companies (ones who can't close a deal/rehab loan) but they know who they are.

For an in-depth read on rehab financing, follow the link below.
 
http://www.zillow.com/advice-thread/Do-I-qualify-for-an-FHA-construction-loan/397257/

Incase this link gets axed, --> search -> FHA construction loan --> "Do I qualify for an FHA construction loan?"
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May 21 2012
Profile picture for user954313
My daughter walked away (deed in lieu) from her 672 sqft home, built 1936, last year.  She bought it in December 2006 during the high prices $130,000 now its listed for sale by the bank for $69,000.  My question is:  its still showing up on the MLS, but the for sale sign was down within a month.  There is no agent listed, but the MLS now says no FHA financing-cash only.  Her property inspector never noted any defects in the property which we now know what they are:  the floor in one bedroom has no support (which we can actually see from the looking in the basement, all of the electrical is original from 1936 (with porcelain fuses and black/red wires), the sewer backs up in the kitchen, bathtub and toliet on a regular basis and floods the basement with 2 feet of sewer water, the sewer drain line in the basement was geri-rigged with a small diameter pipe just resting inside a larger pipe.  There are 10 extremely large maple trees lining the property and the roots have continually broke through the clay pipes to the city sewer line. Even though the basement was pumped out this last time, there is now black mold all over in the basement walls/door. She never missed a payment in 6 years, but could never afford to get all the repairs made.  Within the first 6mos, she contacted the realtor and his friend the property inspector for accountablity-they told her she was SOL. The realtor has moved out of state and the inspector is no where to be found. I think the house needs to be condemned and torn down.  Do you think she did the right thing?  Why would the for sale sign be down but still listed on the MLS with the added no FHA?  Thanks for your input.
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May 04 2012
Oh, and besides condition of the property and/or sellers not wanting to pay closing costs for buyers.  Another option of why this could be noted is, if this is a condo, that the building doesn't meet their requirements of owner occupancy.

FHA requires 51% or more be owner occupied in condo developments.  We have a listing like this with one of our colleagues where an 8-unit building has 5 being used as rentals.  It won't qualify for FHA.

Just some thoughts...
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July 03 2009
Besides some of these off the cuff answers about the state of the property, which could be true, it's possible the seller just doesn't want to pay any of the seller required closing costs for the buyer.

For VA, there are many closing costs for the buyer that are required by the VA loan process to be paid by the seller.  I'm working with a client right now who is VA financed and many agents and their clients balk at the idea of having to give upwards of 3% toward the closing fees.

FHA used to have higher requirements, but in WA State, our financing contracts state a minimum of $300.00.

Savvy agents call ahead to ask.  I called on a house my client liked that we saw yesterday and the financing section said "cash out, conventional or FHA" but no VA as an option.  The agent called me back to say they would consider a VA loan but they'd just accepted another offer the night prior.  Always ask.
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July 03 2009
More then likely the property will not qualify for a FHA or VA loan. ie: the roof or the foundation may have major problems.
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July 03 2009
The seller is being picky there thinking that a buyer with 20% down will not be wasting his time. Or it could be that the property has some sort of a defect that would make it ineligible for FHA.
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July 03 2009
It means you are most likely going to look at some problems.
If FHA & VA financing is welcome, good signs. If not, BEWARE.
Keep it simple, keep it profitable. 

When the opposition wants to control you, 
There is always a reason why.
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July 02 2009
"It's a little presumptuous that it would be listed that way because of structural defects."

+1

There are many reasons why a seller would refuse FHA-financed offers.  As mentioned, the appraisal and/or occupancy cert. issues are probably the most common, but there are other scenarios as well (such as title seasoning requirements for FHA lonas, etc.).
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July 02 2009
It's a little presumptuous that it would be listed that way because of structural defects.  I wouldn't always assume to know everything that's behind a simple financing clause in a listing - each property and each listing agent is different.  There are a multitude of "good" lenders out there who are able to facilitate a 203k FHA loan. 
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June 10 2009
It mean the property will not qualify because of structural defects. Simple as that. Don't even bother with a 203k. That will take forever plus the only good company that offers that with good rates is on the mortgage implode list..Taylor Bean. Your best bet is to look for a seller carryback.
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June 10 2009
In most cases when a listing says no FHA or VA loans, it is because the seller or their Realtor thinks that the property will not likely pass the more indepth scope of an FHA or VA appraiser.  Unlike conventional appraisals, FHA and VA appraisers are more concerned about the safety and health of the buyer, not only the property's market value.  They will take note of items like rotten wood, broken windows, missing screens, mold, termites, and evidence of rodent infestation.  They are also looking for smoke detectors and speedy exit access from the bedrooms in case of a fire.  A conventional appraisal is more focused on the property's value and sufficient market comparables to feel protected in lending money for the property.  There is now an FHA Loan Rehab Program that will now allow for repairs to be completed after closing.  It's called FHA 203k.  As with other loan programs, there are certainly limitations, but for the most part it appears to be a great option for properties that before, had very little financing options.

Purchase and Rehab with ONE loan and ONE closing
FHA Home Renovation Loan Program (203KS)
Example of 203k Streamline
Household improvement up to $35,000 with 3.5% down payment (can be gifted)
HUD has defined eligible renovations as:
Repair/Replacement of roofs, gutters, and downspouts
Repair/Replacement/Upgrade of existing HVAC systems
Repair/Replacement/Upgrade of plumbing and electrical systems
Repair/Replacement of existing flooring
Minor remodeling such as kitchens, which does not involve structural repairs
Exterior Painting
Weatherization including storm windows&doors, insulation, weather stripping, etc.
Appliances - Purchase & installation are included. Appliances may include free-standing ranges, refrigerators, washers/dryers, dishwashers, & microwaves
Repair/Replace exterior decks or porches
Lead-based paint stabilization or abatement of lead-based paint hazards
Basement finishing & remodeling, which does not involve structural repairs
Basement waterproofing
Window & door replacements & exterior wall re-siding
Septic system and/or well repair or replacement
Improvements for accessibility for persons with disabilities
For lead-based paint stabilization costs above & beyond that paid for by HUD when it sells real estate owned (REO)
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June 10 2009
Profile picture for acrewdog
I signed a contract on the house I'm trying to buy on March 28th.
Today we are hoping to maybe close on Friday.  Maybe.  We are buying a REO property with a FHA loan through the company that owns that property.  To date we have dealt with a terrible FHA inspector that required, among other things, painting the whole interior of the house, removing the roof from an outbuilding, Several inspections that he refused to do himself, Refinishing a tub(he wanted it replaced), replacing an entire septic tank and drain field because we din't know where the drainfield was, and replacing a missing shower head.
FHA is a crapshoot based on the inspector.  He can ask for stuff that the FHA no longer requires, or does not require or stuff the buyer can care less about but it will hold up the process.

My advice on a FHA loan, only go with a company that will hire an inspector that they know personally and have dealt with in the past.  IF they have a company that does that for them, no matter what they offer you to do thier loan through them, run.
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June 10 2009
Hi,
No FHA or VA loans means that for some reason the owner doesn't think that his home will pass the appraisal without needing repairs. Maybe they want to sell "as-is" or don't have the money to fix things. Either way, for a buyer, if the price is lower than the comps you can kind of guess why. If it's where you want to live and you have the skills and time, it might save you thousands to check it out. If the work is extensive then you need a 403k or a conventional loan, which probably will cost you as the buyer more to get. Every lender has more info on these loans than agents so talk to your lender to see if you can manage the loan before you look at distressed properties. Some banks are more prone to give these loans than others so ask around. Hope that helps.
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June 10 2009
Some homes simply cannot pass a FHA appraisal/ inspection and some sellers are not in a position to make the necessary repairs or updates.  In this market, no one (that includes buyers and their Realtors) should ever make assumptions before touring the home. (i.e. And I quote,  "The sellers are probably acting on bad advice from their real estate agent who most likely doesn't know any better. So in effect, the seller is excluding a potential pool of buyers who may be interested in buying their home and will make it more difficult for them to sell their own home".)  FHA/VA products are tremendous&the home may also qualify for FMHA or other rehab/restoration loans provided by FHA.  My advice is that if you're interested in the home, regardless of what the terms state in the local MLS, have your Realtor take you on a tour and evaluate the homes' potential for alternative financing options.
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June 10 2009
It means the seller will not sell his or her home to you if you plan on getting an FHA or VA backed mortgage to finance the home.

There's a reason: FHA used to be tough on appraisals. That has changed. FHA appraisals are now more in line with appraisals for convetional mortgages. VA requires the sellers to contribute to the buyer's closing costs on a mortgage. The sellers can compensate for that by simply negotiating a tad bit higher sales price than they would for someone who was using conventional financing. 

The sellers are probably acting on bad advice from their real estate agent who most likely doesn't know any better. So in effect, the seller is excluding a potential pool of buyers who may be interested in buying their home and will make it more difficult for them to sell their own home.
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June 10 2009
 
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