Can You Get A Mortgage On A House With Fire Damage

Published on May 06th, 2023

Buying a home is a life-altering decision that will affect you financially, speaking, for decades to come. But what if the home you are interested in purchasing has been damaged in a house fire? A fire-damaged house might not meet building codes due to the extensive fire damage or smoke damage which can negatively impact the overall market value of the property and your ability to get a mortgage loan from a lender and even insurance after you own the property.



Throughout this article, we will discuss fire damage, how you can still purchase your dream home with fire damage, and how it will affect your mortgage, interest rate, and monthly mortgage payments.

Things to Be Aware of When Buying Fire Damaged Houses

While purchasing a fire-damaged property would ensure a great way to secure a low price on a home, how will you be paying for it? Many fire-damaged houses sell for a cash offer at a low purchase price - is that something you can do?

Additionally, fire damage can be quite extensive and may not always be able to be fixed. The entire house could be unsalvageable in many cases and not worth fixing. Not only do you have to worry about fire damage, but you also have to worry about secondary damage that occurs when putting out the fire and while the fire is burning. These damages include water damage from firefighters putting out the flames, which could lead to mold problems in the future, and smoke damage, which can be hard to get rid of.

Also, many firefighters use chemicals when fighting fires, and those chemicals can leak into air ducts in HVAC units, which can lead to numerous air quality issues for years to come for potential buyers. As a new homeowner, will you be ready to tackle the challenges associated with this investment?

The Risk of Buying a Fire Damaged House

Many homeowners will try to repair some of the fire damage before selling their home to a buyer. If that is the case with the property you are interested in, make sure you conduct a thorough investigation into the fire-damaged home.

Buying a fire-damaged house might sound easy enough, but have you really taken into account the cost of repairs and whether or not you can afford them? Is a good deal worth the work in the long run?

Since your potential home might not meet the local code, it could be difficult to attempt a traditional mortgage on a fire-damaged property with a standard mortgage broker. Mortgage lenders typically do not issue loans on homes that have been deemed unfit for habitation through a standard mortgage program. This is because not only is the home unsafe for you to live in, it can cause damage to your personal property and is a huge financial liability to the lender, which most lenders will try to avoid.

Suppose you're unable to pay cash for the house and have a reasonable amount of credit card debt, a good track record of making payments, a monthly income level that qualifies for government programs, and down payment. In that case, there are other options that are available to you. In any case, you will want to make sure that the program or loan you go with fits within your monthly mortgage payment budget.

The federal housing administration of FHA will back loans through a mortgage lender offering a Section 203K loan or Urban Development (HUD) loan. These loans come with higher interest rates and closing costs but will provide rehabilitation money for your new house to conduct any needed repairs. To answer any questions about these government-backed loans and the application process, check out think link.

Finding the right coverage for a home that has been involved in a fire can cause issues as well. What if your home does not qualify for standard property insurance due to the extent of the damage? Shopping around and comparing one insurance company to another will ensure that you select the right insurance company for your needs and keep your insurance cost low.

The amount of insurance coverage you need will depend on what your plans are for the property after renovations are made. Will you save the property and live there yourself, or after doing a repair, will you be using the home as a rental property? All of this will factor into how much insurance you need on the house and the overall costs associated with it. Make sure your house budget can accommodate these premiums.

If buying a house with fire damage seems like something you're still interested in, make sure you proceed with caution and do your research on any potential issues that could arise in the near to distant future due to the extent of the damage. It's better to go at purchasing a home with issues slowly than rush in and be unprepared and not able to pay for repair costs.

For more information on purchasing or selling a home that has been damaged, please check out our blog for a comprehensive list and discussion of such damage.