Can’t find an affordable FHA-approved home? You likely have options

FHA loans are especially popular with firsttime home buyers, due to more lenient credit score and debt-to-income (DTI) requirements. What’s an FHA buyer to do? Here are three options.

PRICED OUT? LOOK AT FHAAPPROVED CONDOS

If an FHA-approved single-family house would push your budget past its breaking point, consider making your starter home a condo.

As of October 2019, borrowers can get FHA loans for individual condo units without having to worry about whether the entire complex is FHA approved. John Graff, CEO of Los Angeles-based Ashby & Graff Real Estate, said via email that this change should increase the inventory of FHA-approved condos, offering a broader selection of affordable homes.

You’ll want to budget for condo homeowner association fees as well as property taxes. But generally, opening up your search to include condos should bring you lower-priced options.

FOUND A FIXER-UPPER? GET AN FHA 203(K) LOAN

In markets with older housing stock, passing an FHA appraisal could be a bigger obstacle than cost. Listing photos that make a low-priced house look like a charming fixer-upper can conceal major issues, Corning, New York, real estate agent Jennifer M. Baker noted in an email.

An appraiser’s key objective is ensuring the property is a sound investment for your lender. But an FHA appraisal isn’t just about value. To be eligible for an FHA loan, the home must also meet the FHA’s minimum property requirements by being “safe, sound and secure.”

If you see potential in a house that won’t pass an FHA appraisal, an FHA 203(k) loan could help you afford the needed work. It has similar requirements to a regular FHA home loan, but the costs of renovating the property are rolled into the total mortgage amount, which is based on the “as is” appraisal and an estimate of the home’s value once the renovation is complete.

FACING STIFF COMPETITION? BE FLEXIBLE

There are affordable homes out there, but with many buyers competing for them, it’s a seller’s market.

“When a home goes on the market up to about $250,000, we’ll see an actual race to get to that home,” says Michelle Sloan, broker and owner of Re/Max Time near Cincinnati. “We’ve seen up to 10 offers within 24 hours of a property being listed.”

Though you can use strategies to make your offer more attractive — like being flexible on the closing date — you may also be able to find more options by changing your home search criteria.

A short commute may be a high priority, Sloan says, but allowing for a little added drive time could get you more potential properties.