Can You Get a Mortgage on an As Is House?

Properties listed “as is” often attract buyers due to lower prices. Many wonder if a mortgage can be obtained for such a property. While “as is” homes present unique considerations, securing financing is possible. Success involves understanding how lenders evaluate these properties and available mortgage options.

Defining “As Is” for Mortgage Purposes

In real estate, “as is” means the seller will not perform any repairs or improvements before closing. The buyer accepts the property in its current condition, including any defects. However, for mortgage lenders, “as is” does not exempt a property from meeting minimum safety, soundness, and structural integrity standards. Lenders must ensure the property, as collateral, is a secure investment.

To qualify for most mortgages, a property must be habitable and free from significant hazards. This includes a functional roof, sound foundation, working utilities like electricity and plumbing, and no active leaks or major structural damage. Lenders require an appraisal to confirm the property meets these fundamental conditions. Any deficiencies compromising safety or structural integrity must be addressed for the loan to proceed, regardless of the “as is” designation.

Types of Mortgages for “As Is” Properties

Several mortgage programs can accommodate “as is” property purchases, each with specific condition requirements. The Federal Housing Administration (FHA) offers the 203(k) rehabilitation loan. This loan allows borrowers to finance both the purchase price and necessary renovations into a single mortgage. It is useful for “as is” properties requiring significant work to meet FHA’s Minimum Property Standards.

Veterans Affairs (VA) loans, available to eligible service members, veterans, and surviving spouses, can also be used for “as is” properties. A VA appraisal requires the property to meet Minimum Property Requirements (MPRs) related to safety, sanitation, and structural soundness. The property must satisfy these MPRs for loan approval. If it does not, the buyer may need to negotiate for seller repairs or consider other financing options.

Conventional loans, offered by private lenders, can sometimes finance “as is” homes if condition issues are primarily cosmetic and do not affect safety, structural integrity, or habitability. These loans have stricter property condition requirements than FHA 203(k) or VA loans. If the “as is” condition involves significant structural problems or safety hazards, a conventional loan may be difficult to secure without repairs. For properties not meeting traditional lending standards, private money or hard money loans exist, though these come with higher interest rates and shorter repayment terms.

Property Assessment and Lender Requirements

When financing an “as is” home, a thorough property assessment is a key step. A licensed appraiser evaluates the property’s market value and condition. For an “as is” home, the appraiser identifies health and safety hazards, structural defects, and code violations impacting habitability or value. The appraiser’s report will identify specific repairs required for the property to meet the lender’s or loan program’s minimum property standards.

Following the appraisal, the lender’s underwriting department reviews the appraisal and any inspection reports. This review determines if the property satisfies the chosen loan program’s guidelines, such as FHA’s Minimum Property Standards or VA’s Minimum Property Requirements. Even for an “as is” sale, the lender may condition loan approval on certain repairs completed before closing. These conditions are non-negotiable, as they are tied to the safety and soundness of the collateral.

If the appraisal identifies necessary repairs, the buyer is responsible for addressing them. For example, an FHA-insured loan will not close on a property with unaddressed health and safety concerns. Therefore, the property must meet the required standards for financing to proceed, even if the seller is unwilling to perform repairs.

Steps to Secure a Mortgage for an “As Is” Home

Securing a mortgage for an “as is” home begins with lender pre-approval. During this initial conversation, discuss your intention to purchase an “as is” property and inquire about suitable loan programs. This helps identify potential challenges and solutions. Understanding financing options before making an offer provides a strategic advantage.

Once pre-approved, begin your property search, carefully considering financing implications for “as is” homes. When submitting a loan application, provide standard financial documentation and any property condition disclosures. The lender will coordinate the appraisal and necessary inspections, whose results directly influence loan approval. It is important to be prepared for the appraisal report to identify required repairs, even if the property is sold “as is.”

If the lender mandates repairs based on the appraisal, several options exist. If using a rehabilitation loan like an FHA 203(k), repair costs can be rolled into the mortgage. Alternatively, the buyer might negotiate with the seller, or undertake repairs themselves prior to closing if feasible and permitted by the lender. The closing process proceeds once all property condition requirements are satisfied and other loan conditions are met.