Things You'll Need:
- Determination
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Step 1
Make the most out of your real estate agent. Before you see any property make sure your agent has talked to the listing agent and let them know you are going with an FHA or USDA loan. The listing agent will be sure to reveal any potential problems with either loan (they don't want to waste their time with a deal that won't go through either).
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Step 2
Do some homework yourself. USDA loans cannot be in flood zones, if you need a 0 down loan, you can't get one in a flood zone. Check out floodsmart.gov and see if it's in a flood zone before you look at it.
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Step 3
FHA and USDA financed properties need to meet certain standards before your bank will give you a loan for them. Any big problems like a bad foundation, bad plumbing, electrical repairs needed, leaking roofs, even PEELING PAINT can kill your deal.
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Step 4
In a normal private sale minor repairs are not a huge obstacle because you can get the seller to take care of them to help you get financing. BUT, if you're looking in the bottom of the market, you are probably finding a lot of REO (bank owned) properties. Banks are usually very unwilling to do repairs or allow anyone else to do the repairs.
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Step 5
My number one recommendation for these properties is to drop them. It can be heart breaking, especially if you discover the problem after already investing in an appraisal or inspection, but proceeding could cost even more. You can attempt to negotiate with the bank but expect big expenses for multiple inspections and closing costs that will only be repaid after closing (which means if you don't make it to closing, it is your loss).
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Step 6
If you have your heart set on a property that you know is going to fail your bank's appraisal, you can try what I tried. I once went into a bank owned property (which under the law is trespassing), and made some minor plumbing repairs so that the water could be turned on. I don't recommend this route, it is costly and risky and you cannot recover any of your expenses if you don't get the house. Don't go overboard.
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Step 7
Above all, don't give up. You will probably not get the first house you try to buy. If you seem to have exhausted all your potential houses, search farther out. If you can drive 45 minutes to work and get a house at the right price for you, then do it! Don't compromise what you can afford to pay, keep checking for new listings, and if you have to, put in low offers on overpriced houses. Keep trying, don't give up.
