I represent many first-time home buyers during the purchase of their first home in San Francisco. More and more buyers are aware of Federal Housing Administration (FHA) programs as an option when working with a low down payment or less than stellar credit scores. When buying with FHA though, you have to profile the properties you are considering or you may be spinning your wheels.

FHA will lend on single family houses, but beware the FHA appraisal. If you are not using the FHA loan designed for fixers, the house needs to be in good condition. If it is obvious there are windows, walls or floors missing, you probably can’t get a loan on it. If there is obvious dryrot and/or termite damage, you may not be able to get a loan on it.

It is imperative to work with a good lender to watch for issues that might impede your ability to complete your purchase. Knowing the possible roadblocks and having solutions ready may also help you to get the listing agent to have their seller accept your offer. Many agents are wary of having their seller accept offers that include FHA loans.

The listing agent may be even more wary of accepting your offer to buy with FHA financing if you are looking at a condo. Unless the condo complex is already FHA approved, you need to have some idea if the guidelines will allow you to purchase in the complex. Again, your best resource is a good lender experienced with FHA programs.

There may be issues with smaller complexes, though rumor has it FHA will be allowing purchases in 2-unit condo buildings soon, an important change for FHA condo buyers in San Francisco, since we have many 2-3 unit Victorians that have converted to condos. But there are more rules, like the complex must be at least 51% owner-occupied. If you are trying to buy in a 2-unit complex and the other unit is rented, your deal will not go through.

Regarding combining assistance with your first purchase:

The San Francisco Mayor’s Office of Housing (SFMOH) recently reduced the amount of funding available to limited-income, first-time home buyers through their Downpayment Assistance Loan Program (DALP) program. Now they are providing funds only to certain borrowers and only for bank-owned and short sale properties (I suspect SFMOH approvals and funding will slow to a crawl since many distressed properties will have problems with the FHA appraisal). When using the DALP program, the interest-free, payment-free loan that the City awards the buyer does not count towards the down payment in the eyes of the lender. You will need a local lender who is approved by the SFMOH in order to participate in any of these available programs.

It is easier for me to convey this information and more either by phone or in person! Please do not hesitate to contact me.