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The 2 Major Snags That Can Derail Your Mortgage Loan: Significant Home Repairs And A Low Appraisal
The mortgage lending underwriting environment has changed dramatically in the last several years. At the peak of the bubble, mortgage professionals joked that you needed only to be able to fog a mirror to get a loan. These days, even borrowers with good incomes and good credit scores can get turned down.
Much of the change is driven by the stricter underwriting standards imposed by Fannie Mae, Freddie Mac and FHA. There are two major issues which come up repeatedly in transactions today which can derail a borrower’s loan: (1) repairs, and (2) the appraisal.
1. The house requires substantial repairs
A lot of properties on the market these days are foreclosures owned by banks, short sales, or otherwise aren’t in great repair. Further, in a buyer’s market, sellers will not hesitate to agree to a list of repairs.
Broken windows, defective appliances, roof leaks, unfinished renovations, and serious water damage can all cause problems with obtaining final lender approval of the loan. At worst, the a substantial amount of required repairs could cause a lender to bail out. At best, the lender will require a pre-closing inspection and make the loan commitment subject to the satisfactory completion of all work.
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