Why some locations don’t work for FHA loans

All locations are not created equal and some properties don’t quality for FHA financing because of location issues. Have a read below directly from FHA’s 4150.2 Handbook, Appendix D. This is important to keep in mind for appraisers, but it’s good for real estate agents too when marketing a property. Are there any gas stations, Superfund sites or any other potential hazards nearby? Could these locations potentially impact the subject property’s ability to quality for FHA financing? You can cure basic FHA condition issues like broken windows and missing dishwashers, but location isn’t too curable, is it? This underscores how important it is to know the local neighborhood market and definitely be aware of the types of commercial properties nearby too.

FHA guidelines require that a site be rejected if the property being appraised is subject to hazards, environmental contaminants, noxious odors, offensive sights or excessive noises to the point of endangering the physical improvements or affecting the livability of the property, its marketability, or the health and safety of its occupants. Rejection may also be appropriate if the future economic life of the property is  shortened by obvious and compelling pressure to a higher use, making a long-term mortgage impractical.

FHA loan specialist Sheri Schmitz says, “As far as location problems, that’s not an issue I run into a lot around here in the Sacramento area.  In the past, I have had to deal with issues such as, defunct gas station next door- what a nightmare- soil tests, engineer certs, underground gas tank issues, etc.  Realistically my only location issues are zoning issues.  Zoned commercial- with a residence- is not going to fly.  For some reason though, I had more issues with locations in a rural area such as Red Bluff than in the greater Sacramento region.” Catch up with Sheri on her website, Twitter or give her a call at 916-605-9722.

What sort of location scenarios might cause a property to be disqualified for FHA financing?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

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