Want a Better Chance of Selling Your Home? Make It FHA-Friendly.
A Federal Housing Administration (FHA) mortgage allows buyers with good credit to buy homes with down payments as low as 3.5% – making them very popular with first-time home buyers. In fact, the FHA insures mortgage loans for about 30% of today's home buyers. So if your home doesn't meet FHA requirements, you could be cutting yourself off from almost one-third of potential buyers. Here's how to increase your chance of selling your home by making sure it's FHA-friendly.
Check the FHA Loan Limits for Your Area
The loan limits set by the FHA vary based on different markets. So the first thing you'll want to do is check to see if your home's listed price falls within FHA lending limits for your area. If your home's price is just above the loan limit, lower it. If it's far above the limit, your home may not be an option for FHA buyers.
Fix Any Major Problems
The FHA will not approve a mortgage for your home until you repair any serious defects. These include roof leaks, rotted wood, mold, pest issues, heating system issues, foundation or structural damage, leaky basement, standing water in a crawl space, pre-1978 interior or exterior paint that could contain lead, and other safety issues. To increase your chances of approval, fix any major problems like these before you put your home on the market.
Inspection vs. Appraisal
An appraisal is different than a home inspection. The FHA only relies on reports by its approved appraisers to help determine the value and condition of the property. Be sure to provide the FHA appraiser with easy access to harder-to-reach places like attics and crawl spaces. Keep in mind that most buyers will ask for a home inspection, whether or not they're using an FHA loan to buy the home.
Help With Closing Costs
Most FHA buyers will be wary of closing costs and will want you to help with them. The FHA allows sellers to pay up to 6% of the sale price of the home to help with closing costs.
Selling a Condo?
First, be sure your condo is FHA-approved for mortgages. Then, find out what your association's delinquency rate is. The FHA generally won't insure condo loans if more than 15% percent of the owners in the association are late on fees. It will also usually not approve a mortgage for a condo in an association where the FHA is insuring 50% or more of the units. Other FHA rules cover insurances, cash reserves, and how many units are owner-occupied.
Taking these steps to make your home FHA-friendly can help make it more attractive to buyers, increase the number of people who view it, and even increase the number of offers you receive.