By Don McCue
Reprinted by Permission
When you apply for a mortgage, lenders assess two things: your risk as a borrower and any risks associated with the property. While you can influence the former through having a good credit score and low debt-to-income ratio, the latter requires a careful eye when shopping for your home.
Keep your financing opportunities open before you buy by watching out for these potential risks during your home search.
Property risks are important to look for
Certain home features are financially risky, and too much risk makes it harder to get approved for financing. This is true for conventional mortgages and even more so for FHA loans, which tend to have more rigid property requirements.
Here are four major concerns that can cause setbacks, even for conventional financing:
An Old Roof
Roofing must have at least two years of functionality remaining to qualify for most mortgages. If the roof is too old, it’s worth asking the seller if they will update it. To ‘ball-park' it, consider that an average roof lasts roughly 20-25 years.
Structural Issues
Homes need to be structurally sound to qualify for a conventional mortgage. Structural issues can often be hard to spot, so a third-party home inspector, or structural engineer, can help you identify any potential concerns.
Mold or Excessive Water Damage
Both are safety issues that can set your financing back. These are considered “adverse conditions” and will be noted on the appraisal. Further, water damage that is incurred after you purchase a home can adversely impact your insurance costs for years.
Uninsurability
If a home cannot be insured due to its vulnerability to wildfires, flooding or other environmental hazards, it will likely pose problems with financing as well. Be sure to check with your insurance agent if the property you're interested in can be insured through the private market before considering an offer.
What were some of the issues you ran into when house hunting (or are running into now)?
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