When you first start looking into financing a house purchase, you may hear several exciting things about FHA loans. These loans are backed by the U.S. Federal Housing Administration, so they provide mortgage options to people who may not be eligible for conventional loans. An FHA loan may be a good option when your income or savings are on the lower side, but it may come with some limitations. Here’s what you need to know if you’re looking to find a home in Irvine that meets the criteria for an FHA loan.
Your Finances Still Limit Property Choices
Your overall savings and income still play a role in the type of home you get. An FHA loan will require a 3.5 percent down payment for those with a credit score of at least 580 or a 10 percent down payment for those with a score under 580, which means you cannot buy an extremely expensive home unless you have all the money required by the FHA loan rules.
The FHA Requires Properties to Meet Basic Safety Requirements
Before the FHA will approve a loan for a specific property, it requires an inspection because the home needs to meet rigorous standards for keeping occupants safe. Homes with mold, frayed electrical wires, asbestos, or other issues may not be eligible for an FHA loan unless the problem is remedied before closing. The home must also have working appliances and utilities and meet fire safety code standards.
Properties Purchased with FHA Loans Must Be Structurally Sound
Homes need to be well built and structurally sound because the FHA uses the property itself as collateral for the loan. Any sort of physical deficiency or condition that impairs structural integrity may keep a property from being FHA eligible. Common things that keep a home from being approved by the FHA include leaky roofs or problems with the foundation. Any signs of decay, such as warped flooring and walls, may also be an issue.
You Can Only Buy Secure Homes with an FHA Loan
The third requirement for a home to meet FHA approval standards is security, which means the house properly protects the property and homeowners from security intrusions. It needs to have fully functional doors and windows with proper locks, and all entrances need to meet fire safety exit requirements.
FHA Loans Cannot Be Used for Commercial Real Estate
FHA loans aren’t supposed to be used for properties designated as commercial real estate, which means any properties with more than four units cannot be purchased with an FHA loan. FHA loans are only allowed for owner-occupied property, not places meant to be rentals. There are a few exceptions, but typically you have to live in the home for at least a year before moving and renting it out.
FHA loans are a great option for many home buyers. If you’re not sure which type of loan is best for you, do your research before you decide, and make sure to find a realtor in Irvine with in-depth knowledge of the details of home financing. Rely on the experts at Irvine Residential Living to help you find your dream home and guide you through the home-buying process. Call one of our friendly agents today at 714-454-6304.