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mortgage process

What This Means for Homebuyers by Loan Type

 Before You Buy: Loan-Specific Considerations

For All Loan Types - Ask the Right Questions:

For All Loan Types - Ask the Right Questions:

For All Loan Types - Ask the Right Questions:

  •  What infrastructure is included in common areas?


  • How was the development approved and by which agencies?


  • Are there any known issues with infrastructure in the community?


  • What are the long-term maintenance obligations and HOA reserve levels?

FHA Loan Buyers:

For All Loan Types - Ask the Right Questions:

For All Loan Types - Ask the Right Questions:

  •  Verify the development has current FHA approval
  • Ask specifically about infrastructure completion timeline and any temporary systems
  • Understand that infrastructure problems could affect future FHA eligibility
  • Budget for potential MIP payments even if property values decline
  • Ask about any pending special assessments that could affect affordability
  • Inquire whether roads, drainage, and utilities are permanent or temporary installations

VA Loan Buyers:

For All Loan Types - Ask the Right Questions:

USDA Loan Buyers:

  •  Confirm the property meets VA Minimum Property Requirements
  • Understand VA appraisal may catch some but not all infrastructure issues
  • Ask about completion timeline for any infrastructure still under construction
  • Know that your VA benefit could be tied up if infrastructure problems affect the property
  • Research whether the development has had VA loan issues in the past
  • Verify that utilities and access roads are permanent, not temporary installations

USDA Loan Buyers:

Conventional Loan Buyers:

USDA Loan Buyers:

  •  Verify continued rural eligibility (development patterns can change this)
  • Understand unique rural infrastructure challenges (wells, septic, roads)
  • Ask about completion timeline for rural infrastructure like internet, cell towers, paved roads
  • Budget carefully as income limits may affect ability to handle surprise assessments
  • Ask about any planned development that could affect rural designation
  • Inquire about long-term maintenance plans for rural infrastructure systems

Conventional Loan Buyers:

Conventional Loan Buyers:

Conventional Loan Buyers:

  •  Check if the development meets current GSE standards
  • Understand PMI implications if property values decline due to infrastructure issues
  • Ask lender specifically about infrastructure completion requirements
  • Research the development's history with Fannie Mae/Freddie Mac approvals
  • Verify whether appraisal assumed completed infrastructure that may still be under construction

Jumbo Loan Buyers:

Conventional Loan Buyers:

Conventional Loan Buyers:

  •  Expect more stringent property condition requirements
  • Budget for potentially higher infrastructure repair costs
  • Ask about timeline and financial guarantees for any incomplete infrastructure
  • Understand that fewer financing options may be available if problems arise
  • Consider additional inspections given higher financial exposure
  • Inquire about developer financial stability and ability to complete promised infrastructure

Additional Due Diligence by Loan Type

All Buyers Should:

Government-Backed Loan Buyers Should Also:

Government-Backed Loan Buyers Should Also:

  • Review HOA financial statements and reserve studies
  • Research the developer's track record across multiple projects
  • Understand your specific obligations under mortgage riders
  • Consider consulting with professionals familiar with infrastructure risks
  • Ask for a detailed infrastructure completion timeline and what systems are temporary vs. permanent
  • Request copies of all infrastructure bonds and government approvals
  • Verify what recourse exists if infrastructure is never completed as planned
  • Understand your financial obligations if the developer abandons incomplete infrastructure

Government-Backed Loan Buyers Should Also:

Government-Backed Loan Buyers Should Also:

Government-Backed Loan Buyers Should Also:

  • Verify current program approval status for the development
  • Understand how infrastructure problems could affect program eligibility
  • Research any recent changes in program requirements that might affect resale
  • Budget for insurance/fee requirements that can't be eliminated
  • Ask specifically whether the government agency has verified infrastructure completion or just approved plans
  • Understand that government backing of your loan doesn't guarantee infrastructure completion

Red Flags for Incomplete Infrastructure

Warning Signs to Watch For:

  • Temporary roads or utilities (gravel roads, above-ground utilities, temporary bridges)
  • Missing amenities shown in marketing materials (pools, clubhouses, walking trails)
  • Ongoing construction in common areas while homes are being sold
  • Vague completion timelines from developers ("will be completed soon")
  • Multiple development phases with unclear infrastructure dependencies
  • Recent developer financial issues or project delays
  • Missing final government approvals or pending inspections
  • HOA budgets that don't account for infrastructure completion costs
  • Marketing materials that show "planned" or "proposed" amenities as if they're guaranteed

Questions Every Buyer Should Ask

Questions Every Buyer Should Ask

 About Infrastructure Status:

  • Is all infrastructure actually complete, or are some systems temporary?
  • What is the specific timeline for completing any remaining infrastructure?
  • Who is financially responsible if infrastructure is never completed?
  • Are there bonds or other financial guarantees in place for incomplete work?


About Financial Protection:

  • What happens to my mortgage if infrastructure problems affect property values?
  • Am I financially responsible for completing infrastructure through HOA assessments?
  • Does my loan type provide any protection against incomplete infrastructure costs?
  • What recourse do I have if the developer abandons the project?# Hidden Infrastructure Risks in Home Financing: What Every Homebuyer Should Know

The Home Buying and Financing Process

Your Home: Your Largest Investment

 For most Americans, buying a home represents their largest financial investment. Since few people can afford to pay cash, the vast majority rely on mortgage financing to make homeownership possible. 

Understanding Different Loan Types

Conventional Loans (Most Common)

Conventional Loans (Most Common)

Conventional Loans (Most Common)

  • Down payment: 3-20% depending on lender and borrower qualifications
  • PMI required if down payment is less than 20%
  • Conform to Fannie Mae and Freddie Mac guidelines
  • Best rates typically available to borrowers with strong credit

FHA Loans (Government-Backed)

Conventional Loans (Most Common)

Conventional Loans (Most Common)

  • Down payment: As low as 3.5%
  • Mortgage Insurance Premium (MIP) required regardless of down payment
  • More lenient credit requirements
  • Popular with first-time homebuyers
  • Loan limits vary by area

VA Loans (Veterans Benefits)

Conventional Loans (Most Common)

VA Loans (Veterans Benefits)

  • Down payment: $0 (100% financing available)
  • No PMI or MIP required
  • Available to eligible veterans, active military, and qualifying spouses
  • Competitive interest rates
  • VA funding fee may apply (can be financed)

USDA Rural Development Loans

Jumbo Loans (High-Dollar Properties)

VA Loans (Veterans Benefits)

  • Down payment: $0 for eligible rural and suburban areas
  • Income limits apply
  • Upfront and annual guarantee fees required
  • Must meet property location and borrower income requirements

Jumbo Loans (High-Dollar Properties)

Jumbo Loans (High-Dollar Properties)

Jumbo Loans (High-Dollar Properties)

  • For loan amounts exceeding conventional loan limits ($766,550 in most areas for 2024)
  • Typically require 10-20% down payment
  • Stricter credit and income requirements
  • Higher interest rates than conventional loans
  • Often kept by lenders rather than sold to GSEs

Private Mortgage Insurance and Government Alternatives

PMI for Conventional Loans:

FHA Mortgage Insurance Premium (MIP):

FHA Mortgage Insurance Premium (MIP):

  • Required when LTV is above 80%
  • Cost: 0.3% to 1.5% of loan amount annually
  • Can be removed when LTV drops to 78%

FHA Mortgage Insurance Premium (MIP):

FHA Mortgage Insurance Premium (MIP):

FHA Mortgage Insurance Premium (MIP):

  • Required on all FHA loans regardless of down payment
  • Upfront MIP: 1.75% of loan amount (can be financed)
  • Annual MIP: 0.45% to 1.05% depending on loan terms
  • May be required for the life of the loan

VA Funding Fee:

USDA Guarantee Fee:

USDA Guarantee Fee:

  • One-time fee ranging from 1.25% to 3.3% of loan amount
  • Can be financed into the loan
  • Waived for veterans with service-connected disabilities

USDA Guarantee Fee:

USDA Guarantee Fee:

USDA Guarantee Fee:

  • Upfront fee: 1% of loan amount
  • Annual fee: 0.35% of loan amount

The Appraisal Process: Your Protection That May Not Protect

How Home Appraisals Work

 When you apply for a mortgage, lenders require an independent appraisal to determine the home's market value. This appraisal:


  • Is paid for by you (typically $400-$800)
  • Is ordered by your lender from an independent appraiser
  • Determines the maximum amount the bank will lend
  • Protects both you and the lender from overpaying

Professional Standards: USPAP

What is USPAP?

What USPAP Requires

Why USPAP Exists

The Uniform Standards of Professional Appraisal Practice represents the recognized ethical and performance standards for appraisers in the United States. 

Why USPAP Exists

What USPAP Requires

Why USPAP Exists

 These standards were established following the Savings and Loan crisis of the 1980s, when inconsistent and unreliable appraisals contributed to massive financial losses. Congress mandated these standards through the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) in 1989. 

What USPAP Requires

What USPAP Requires

What USPAP Requires

 Appraisers must follow strict guidelines for property valuation, ensuring consistency and reliability in the appraisal process. 

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