Ethical Homes

In an effort to become more competitive, FHA has made some significant changes to the rules governing loans that they underwrite.

Until now, FHA required independent inspections of all homes purchased with FHA loans, and mandated that the seller make any repairs that the inspector deemed necessary—often including minor cosmetic issues—before the loan could be approved. FHA also had a list of fees that the buyer was not allowed to pay, including many “usual and normal” lender fees; if the lender would not waive those fees, the burden of paying them would fall to the seller.

As a result, during the recent seller’s market, FHA loans fell severely out of favor, with many seller’s and sellers agents refusing to even look at offers using FHA loans. Even though that market is finally cooling off, FHA has finally agreed to make their loans more like conventional loans: except for major structural issues, property condition is now negotiable between buyer and seller, and buyers can now pay all usual and normal lender fees except for the tax service fee (usually ~$75 in the DC area).

Hopefully, these changes will make sellers more willing to accept FHA-funded offers; some lucky buyers may even be able to again start taking advantage of FHA 203(k) loans, which allow buyers to finance the cost of renovations to a “fixer-upper” along with the purchase price of the home.