Conventional loan on a rental with structural damage?

Question

Hello,

I"m thinking about purchasing a home that has structural damage to the attached garaged.  Nothing that can't be fixed but it is possible that a conventional loan won't work.  I know about renovation loans which guarantee the property will be fixed and appease the underwriting.  My question is: are there conventional lenders that seem to have relaxed standards on conventional loans especially if the damage part to the home is not living space?  Thanks for your help.

Ian K. · Answer

@Chris Mason  we went under contract today.  Going to go for a reno to make sure it gets done.  The property has already fallen out of contract twice, I presume through conventional loans.  Thanks for your help!

Chris Mason · Answer

Hi @Ian Kearns,

There's really no way to reliably predict that until the actual exact language from the appraisal is in, and in front of the actual underwriter. I've seen stuff slide that surprised me, and I've seen stuff called out that I felt shouldn't be called out.

Anyone doing 30YF at low rates is following the same exact Fannie/Freddie guidelines, the appraisers are all following USPAP, and regulations since the Great Recession prevent lenders from cherry picking appraisers and underwriters on a per-deal basis.

Something like a hole in the sheetrock in the garage is pretty likely to slide through, something like an imploding garage roof, or a clear safety/health hazard, is going to be an issue no matter what. Everything in the middle is a gray area and a roll of the dice (in spite of the lies that lenders tell to real estate agents to win business).

The good news is that this is true of everyone else writing offers on that place too. If yours is the only offer acknowledging this potential issue with eyes wide open, and with a plan in place to deal with it ("we will go reno if we must, already have a contractor on stand-by to make a bid"), that can give you an advantage in the eyes of the listing agent and seller.