Mortgage loans assume that the property is in acceptable condition Conforming programs will not lend to properties that are in non-habitable conditions. Some lenders may provide loan approvals conditioned on completion of specified repairs and improvements.
Underwriters and processors do not normally visit the residential properties involved in the mortgage applications they are processing. They depend on the appraiser's comments in the appraisal report. However, loan underwriters also examine the pictures required and providedicmas well as their general knowledge about an area—to see if improvements are required. FHA loans actually require more review from the appraiser, with regard to the property's condition.
The nice thing about problems with the property's condition, is that most of them can eventually be fixed. Mortgage loans, in fact, are available for just that purpose.
Underwriters review the property's condition with a focus on the following issues:
- Structural stability. The walls, roofs, windows and entryways must be able to give occupants full protection from the elements. As best as can be discerned, the building must also meet all applicable zoning codes.
- Aesthetic. Loan processors and underwriters will consider some of the property's aesthetic features in assessing the acceptability of the neighborhood and subject. For example, graffiti on the garage doors or a dilapidated front porch are often causes for loan denial or suspension.
- Functional. The building's functional equipment must be in good working order, especially the essential plumbing, heating and electrical systems.
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