3:51 PM 07/26/2012
My husband and I are ready and able to buy a house in north Petworth if we could use an FHA mortgage (we only have about 5% saved for a downpayment), but we lost another house (in a different neighborhood) due to condition issues, and that was with a conventional loan! I know that FHA loans require the home to be in good enough condition, but nobody seems able to give me a straight answer on what good enough means! I see many single family homes coming up in the $300-350K range in Petworth, and many of them are recently renovated and very nice and liveable, but I guess I'm gunshy from my prior experience. I was wondering if anyone has bought an older, but renovated, home with an FHA loan (especially in Petworth) and could give me some advice. Are houses that are nearly 100 years old just going to have too many issues to close with the FHA loan? Any insight would be appreciated!
My wife and I bought our North Petworth (7th and Farragut) rowhouse with an FHA loan in October of 2010. Our house was only in so-so condition. It was safe, but it was very "meh" when we moved in. We had no issues whatsoever. I think FHA is basically looking for safety issues. Ugly tile=fine. Hole in 2nd floor floor that goes all the way to the basement /=fine.
Welcome to the neighborhood!
4:14 PM 07/26/2012 | 0 Votes
No one wants to give you a straight answer because they want to be able to deny you for whatever reason they choose.
I bought with an FHA loan in 2009 and don't remember anything about condition but maybe that's because my home was in good condition (with the exception of a gaping hole under the kitchen sink exposing all the plumbing).
5:09 PM 07/26/2012 | 0 Votes
Thanks guys! Yeah I'm just so confused because on the house we were previously under contract on, they had 'issues' with several easily fixable cosmetic things and did not even mention the issues I found more serious (like brick needing repointing and water damage resulting). Like I said it was a private loan but it was similar to an FHA in terms of the downpayment so I just don't know. Anyways, I hope we can work it out- I just love the neighborhood and am still blown away that we could even possibly afford it! If anyone else has any more advice/experiences I would love to hear!
5:19 PM 07/26/2012 | 0 Votes
The other FHA option is to do an FHA 203k loan which allows you to roll the costs to get the house up to FHA minimum standard into your mortgage. This is what my wife and I did. We bought a foreclosed house in northern Columbia Heights in December 2011. The house was not up to FHA standards, so we used a 203k loan to do some renovations (including the nitpicky things FHA is concerned about). A 203k is time consuming and bureaucratic, but well worth the hassle if you can stay on top of the process. The most challenging part of a 203k is that many lenders don't support this type of loan due to the extra work required on their side. That said, there are some out there.
10:05 AM 07/27/2012 | 0 Votes
You may also want to try other first time homebuyer programs. I know that BB&T has a program where you put 3-5% down and don't have to go through the inspection issues that you would with an FHA loan. Also, there is no PMI so it lowers the fees that you have to pay... I know that other banks also have programs in order to meet their CRA requirements, but they all depend on salary and loan amount. Just something to look into. Good luck and welcome to the neighborhood!!
10:53 AM 07/27/2012 | 0 Votes
My wife and I recently bought a 100 yr old rowhome in North Petworth recently using an FHA loan. No one then could give us a staright answer on what would be a disqualifying condition for the FHA. That being said, I think it really boils down to a few things from our housing search:
1. Is the house structurally sound? No hidden issues like foundation, termites, mold, water damage/leakage issues
2. Is the house livable? No exposed floors or missing plumbing fixtures, all windows and doors are present, drywall in decent condition, no signs of squatters.
The house we purchased had been renovated about 6 years ago, and was in good but not great condition. However, it passed the inspection and appraisal, and the FHA loan was approved rather painlessly(if you consider 12 late night trips to kinkos painless.)
Anyways, it's a pain in the ass, but it's worth it, because North Petworth is a great neighborhood, and you'll be glad you took the plunge.
11:37 AM 07/27/2012 | 0 Votes
Thank you so much for the additional advice! Jim_ed, I'm glad to hear that you guys got approved on a house with a slightly older renovation. I was beginning to think that you had to buy a house fresh from a flipper with brand new granite and stainless steel just to get a mortgage, which seems silly to me. Brightwoodpark, I will definitely be investigating that BB&T loan. I've loaned from them before and it was pretty painless so I would definitely go back to avoid that pesky PMI. Ptb22, I have looked into the 203k process, but I find it very intimidating. However, if we find the 'perfect' house or a killer deal that just needs a little work we might consider doing the streamline 203k. Thanks again, I am starting to feel much more hopeful about this!
11:44 AM 07/27/2012 | 0 Votes
Our experience was also with an FHA loan for a 100 year old row house in Parkview, in Dec. 2010. It had been renovated maybe a decade or two ago and was in sort of sorry shape (a foreclosure that had seen better days, needed updates and repairs). In terms of condition, it had no kitchen (which was not an issue at all), a hideous bathroom, some evidence of small roof leaks, and evidence of past basement flooding. The only thing we had to do was make two small repairs at our own expense before closing - 1) there was a hole punched through one plaster wall that had to be re-plastered and 2) ceiling plaster around a stack pipe had failed and needed to be repaired. Otherwise, it was deemed livable. After that, it was smooth sailing!
12:46 PM 07/27/2012 | 0 Votes
Wouldn't disagree with what others have said. Can offer my perspective too. Bought a petworth home with an FHA loan a year ago. 5% down. I'd guess we're of very similar mindsets and goals. Lessons learned:
1. Generally, not a problem. I took comfort in the arguably more rigorous FHA appraisal process.
2. If you have good / great credit, I STRONGLY recommend going with a conventional loan. Banks will offer it even at low money down if you have great credit. You'll save boatloads of money (many $1000's. Roughly $5k upfront + $2.5-3k / year) with private mortgage insurance or even the significantly higher rate. Reasons: a.) FHA mortgage insurance can be expensive since it is not risk adjusted. Maybe $200 / month more. b.) You have to pay it for 5 years regardless of loan to value or repayment - not true for private. c.) FHA upfront mortgage insurance is expensive too. d). All FHA costs when up a few months ago. Really pricey for upfront and monthly rates now IMHO. Ironically, they have simultaneously dropped MIP rates for those refinancing if you bought before 2009.
But you need good credit. I'm guessing that with 5% down (as opposed to the rock bottom 2.5% or 3.5% allowed with FHA) you have a decent grasp on your finances.
3. There is money to be saved by putting 5% down instead of just under 5%. Maybe $150 / year if my math's right. Just FYI. Might or might not be worth it to you.
4. Be aware that all this FHA MIP might not be tax deductable going forward. Deductability of MIP expired in December. While, it's entirely possible that it will be re-instated during the lame-duck taxaggedon debates, there is some risk.
2:43 PM 07/27/2012 | 0 Votes
That's some really good info, johnv. We do have good credit (our scores average in the high 700 range) and I didn't realize that FHA mortgage insurance is more expensive than private mortgage insurance. 5% down would pretty much clean us out at this price level but the houses we're seeing don't really need any work to move in so we could probably swing it. I will definitely put some effort into comparing conventional loans against FHA. Caitb, I'm surprised they approved a house with no kitchen! Did you do a FHA 203k loan to put one in?
2:52 PM 07/27/2012 | 0 Votes
Definitely check out the Fannie Mae Homepath program ( http://www.homepath.com/index..... I bought a 100+ year-old rowhouse in Truxton Circle through the program late in 2009. I'm not sure whether it's technically an FHA loan, but it's a low down payment loan. I put 3.5% down. The great thing about it is that, through the program, you're buying a house that Fannie Mae owns (foreclosures) and Fannie Mae is financing the purchase . . . so it doesn't require a "lender-requested appraisal." There's a search engine on the website I linked to above, where you can look for specific properties for sale that are elligible for the program. In short, Fannie Mae's approach seems to be: "We know what shape the property's in . . . we own it! And will lend you the money to take it off our hands." My place was in pretty rough shape . . . barely liveable by my low standards . . . not liveable by the standards of some friends and family . . . but I still got the loan. And I'm really, really happy I did! Best financial move of my life. I've since married and my wife and I are renovating it little by little. One word of caution about 203k rehab loans, which I considered when I was in the market . . . they're not suitable for DIY renovation. My understanding is that the lender will only release the rehab funds to a licensed contractor. This makes perfectly good sense from a lender's perspective, but it wouldn't have worked for me. Good luck!
2:56 PM 07/27/2012 | 0 Votes
Glad it was helpful. We didn't realize it either, and are now looking at refinancing to get out from FHA! So would be delighted to help someone avoid the same mistake.But it will be work shopping for a mortgage --- some banks won't do under 10% LTV, MIP rates vary, etc etc. But they are out there and there are some reasonable ones (as I said, we're refinancing).
Completely sympathize with the 5% cleaning you out. You guys sound like you just like us. It has worked out for us so far, but YMMV.
FWIW - FHA, even if more expensive than private mortgage insurance, can still be a good choice in absolute terms. Interest rates are low and it can be cheaper to buy than rent. So please don't let me talk them down too much. They can be a good value proposition depending on your choices.
Other thoughts you might find useful:
1. If you have good income but short savings, 15 or 20 year mortgages might be worth considering.
2. Get a good home inspector --- some measure of help against unexpected expenses.
3.If money's tight, I assume you're considering a significant seller subsidy toward closing costs. We went that way. It's not 100% optimal tax wise (you essentially give 3% of that subsidy to DC for transfer taxes), but I'd do it again in a heartbeat.
4. We live in the ambiguous north petworth / brightwood park zone. We'd also recommend the neighborhood!
3:17 PM 07/27/2012 | 0 Votes
Thanks again, johnv! Glad to hear you like it in north Petworth/Brightwood Park. I was concerned going that far north because I'm not as familiar with it as I am with Columbia Heights/Petworth (and I have a few concerns about the walk to Fort Totten metro and being closer to that than to Georgia Ave metro), but I am extremely impressed with the housing stock there and I thought the neighborhood was lovely when I drove through. Seems like a good compromise between price, safety, and bicycling proximity to bars and restaurants.
3:34 PM 07/27/2012 | 0 Votes
Quite welcome. But I apparently always something more to say! ... we concur on the price / safety / location compromise.
1. We have a few concerns about that walk too. Do it in daylight / commuting hours, but usually use GA ave / Petworth. Nothing too specific, and I've biked it many times, but there's just a couple of deserted areas.
2. The 70 and 79 buses are invaluable!Quick shots up and down GA ave, including to the metro.
3. I do bike a lot and think it's a good compromise location in that respect. Reasonable bike ride to Columbia Heights, access to Rock Creek and Met Branch trails. Not a lot of restaurants / bars immediately in the area, but there are a few good ones here and there.
3:45 PM 07/27/2012 | 0 Votes
FYI, the BB&T loan with the low down payment and no PMI is called a CHIP loan, and it's brilliant. I fincanced my condo purchase in may using a CHIP. I can very highly recommend Spencer Jones (email@example.com) at BB&T to help you through the process. He was great.
9:19 AM 07/30/2012 | 0 Votes
Thanks, melc! I'll give him a call! Purplepalace, a friend of mine purchased his condo through HomePath and recommended it as highly as you. I have been keeping my eye on their website and maybe I'll get lucky and find something. I'm relieved to hear that the financing goes a little smoother through them. Glad to hear it worked out for you!
9:27 AM 07/30/2012 | 0 Votes
FHA standards in buying a house is pretty straight forward; no peeling paint; no health or safety defects such as a missing handrail. An FHA appraiser will pick up FHA issues when they do the appraisal and will flag those to the loan officer. Your inspector should be able to guide you if s/he is well versed on FHA issues.
I'm a retired DC building inspector (not to be confused with a Housing Inspector) today doing home inspection, 203k and litigation support. You need more guideance? ask here or email me at firstname.lastname@example.org
6:56 AM 08/05/2012 | 0 Votes