Gary Wuestenberg's Blog

Welcome back to my weekly blog. This week I want to talk about FHA financing and buying REO properties. First of all FHA financing is way for buyers to purchase a property without having a lot of money to put down. It requires a minimum 3.5% downpayment and the loan is backed by the government. Its a great way to buy a house for a first time buyer however there are some restrictions.  FHA guidelines require that the property be in safe liveable conditions. That means all electrical and water must be working properly, the house must have a clean pest report, no broken windows or doors and if the kitchen has a spot for a stove/oven and or dishwasher then they need to be installed and working. The roof needs to be in good condition and leak free.

That brings me to buying an REO with FHA financing.  As I said in my last blog most REO properties are in some sort of disrepair and are sold AS-IS. Getting the banks to agree to bring the house up to FHA standards isn’t easy but not impossible. Once a property has had inspections and some sort of damage or defects has been found it must be disclosed to any future buyers and it is in the best interest of the seller to agree to do the repairs or agree to credit for the repairs with their current buyer. Now if you are using FHA financing, repairs would have to be done in order for the transaction to be completed. Another issue with FHA financing is that there is a case or file # attached to any property in which a buyer is using FHA. That file # stays with the property even if the buyer doesn’t purchase the house. So another reason for the seller to agree to repairs. 

So in short, FHA financing is possible with REO properties. Not easy but possible. Knowing these things are benificial when negotiating your purchase of an REO or any other property and I’ll go into that in my next blog.

Thanks for reading!