Friday, February 15, 2013

Mold Stops FHA Mortgage! (and Man Bites Dog!)*

A "younger" Steve Dunnett
Steve Dunnett, Mortgage Loan Professional weighs in: 
 We recently had a client who was purchasing a home with an FHA mortgage. He ran into trouble right before the closing due to mold!  Why?
Real photo, unfortunately, by Eric Rojas

FHA mortgages are insured by the US Government; therefore, the property requirements are more stringent than loans obtained without government approval requirements. If you’ve ever bought a home before you may be wondering how it’s possible to make the process more stringent or convoluted... but alas, our government has found a way.  Of course, the government does this with intentions of protecting the people buying homes, and ya know, protecting their own assets. 

If you are obtaining an FHA loan... the government’s assets are also your assets. The one item that is most important to the government in these transactions is whether or not mold is present in the home. If mold is there, the government insists that it is removed before they will agree to insure the loan on the property.  This means two things to you:

(1) If you are ever obtaining an FHA mortgage, you need to make sure that any mold is removed before an appraiser is sent into the property. Otherwise, the appraiser will require a professional to come in to remove it...increasing costs and delaying a closing.

(2) Make sure that the home inspector is looking at these items AND that the inspector is working with your best interests. In the case of our client at the closing table, we had an appraisal completed with a report that stated that there was a questionable substance that could be mold. The home inspector provided a report stating that the substance was not mold... so we scheduled a final FHA inspection on the property to confirm this. 

Unfortunately, the final appraiser confirmed that the substance was definitely mold - it turned out that the original home inspector was found through the seller's attorney and he didn’t provide the correct information (NOTE: hire your own property inspector). In the end we closed the loan - BUT - only after the buyer and seller split a bill of $2500.00 to remove the mold.

If anyone has any questions about FHA mortgages, requirements, or processes; please give me a call. I’d be happy to help anyone out there utilize the FHA program that helps home ownership with low down payments.

Steve Dunnett
*No dogs were bitten