Help Understanding An FHA Loan Contingency Section

Athens, Georgia
Private Lending & Conventional Mortgage Advice
1yFollow

Help Understanding An FHA Loan Contingency Section

Matthew Lindsey
Member since 2021 · 75 posts · 9 votes

Hi,

I'm very new to anything related to an FHA loan. We are selling a property that has been freshly renovated. The buyers want to use an FHA loan and I'm not real familiar with the FHA loan process. However, when reading the FHA Loan Contingency Exhibit, section 20 reads:

Home Warranty:If the improvements on Property are less than one year old at the time of Closing, Seller shall, if required by FHA, provide a home warranty certificate acceptable to FHA.

Does this mean I have to personally warranty any issues on the property that may arise within a year or buy a home warranty from a company that offers that. Can someone please explain this and if that clause is normally imposed on renovated properties?

Property is in GA and built in the mid 80’s but renovated the end of last year.

Thanks

1Reply
19 views

2 Replies

Jump to latestLatest
  • Ken M.
    Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
    1y
    Quote from @Matthew Lindsey:

    Hi,

    I'm very new to anything related to an FHA loan. We are selling a property that has been freshly renovated. The buyers want to use an FHA loan and I'm not real familiar with the FHA loan process. However, when reading the FHA Loan Contingency Exhibit, section 20 reads:

    Home Warranty:If the improvements on Property are less than one year old at the time of Closing, Seller shall, if required by FHA, provide a home warranty certificate acceptable to FHA.

    Does this mean I have to personally warranty any issues on the property that may arise within a year or buy a home warranty from a company that offers that. Can someone please explain this and if that clause is normally imposed on renovated properties?

    Property is in GA and built in the mid 80’s but renovated the end of last year.

    Thanks

    What that says is you buy a Warranty from an approved vendor. I haven't had to do that before but I believe they are about $500. Usually a real estate agent will know how that is done.

    FHA can have multiple surprises.

    0Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
    1y

    The clause you mentioned is for brand new construction homes, not renovations, so you should be fine.  

    Something else to be aware of - if this is a flip and was completed quickly (less than 90 days), you will need to watch out for the flipping rules with FHA. Your buyer cannot enter into a contract to buy with FHA financing if you purchased the home less than 90 days ago. If you purchased between 91 - 180 and the purchase price has increased significantly, they may require a 2nd appraisal. This doesn't necessarily mean the sale will be more difficult, just that the value must be supported.
      

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
    WebsiteView Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free