From: bennett@adobe.com (Bennett Leeds)
Newsgroups: ba.mountain-folk
Subject: Re: Buying a house w/o furnace?
Date: 6 Apr 92 17:19:45 GMT
Article-I.D.: adobe.1992Apr6.171945.3595
Reply-To: bennett@adobe.com
Distribution: na
Organization: Adobe Systems Incorporated

conbio@igc.org writes
> We are looking at purchasing a two bedroom house in unincorporated
> San mateo county.  The house is heated by a wood stove, and has
> no furnace.  Our real estate agent thinks that lenders will likely
> look askance at this, and may require the sellers to put in a
> furnace (!) before we can get a loan.  As we don't WANT a furnace,
> this could cause unnecessary (to us!) problems.
> 
> Does anyone have experience with this? 

This just happened top me last Sept. on a house on Skyline Blvd south of Black  
Rd. It was a real hassle since nobody warned us this may be a problem. The good  
news is you may be able to find a lender who'll work with you.

As I understand it, almost all lenders use Federal guidelines for constructing  
their own loan packages, even if the the loan or amount has nothing to do with  
the FHA. These guidelines were constructed as a "bulletproof" way for the  
government to feel secure that the home they were lending money on is worth  
more than the money being lent (so if they have to forclose they don't lose any  
money). The guidelines include things like having electricity, a water supply,  
sewer or working septic, roof, indoor plumbing, etc.. 

As you might imagine, sufficient heating is a FHA requirement. A single wood  
stove is not considered enough to heat a whole house - there will probably be  
bedrooms without heat sources in them. Unfortunately, space heaters don't  
count. You can install electric baseboard heating, or any other kind of  
"permanent" heating units to be OK with the lenders. If you do this, do it  
before the appraisal.


> Suggestions about how
> we might be able to talk the lender out of this?  Ideas about
> where I might find other homes in this area that are similarly
> heated?

Note that finding other similarly heated homes won't matter. What will matter  
is what the appraiser says on his report. The home I bought appraised easily at  
the purchase price, but the appraiser did footnote on page 5 that there was no  
heat in the bedrooms. Boom - the lender turned us down.

Most lenders sell their loans. They package them up into "pools" (trade term,  
apparently) and sell them in $3 million or whatever size packages. The people  
(companies, actually) buying the pools almost always want all the loans to meet  
FHA guidelines so they feel their investment is protected. You will probably  
not be able to get a loan from a company that wishes to sell your loan. On a  
package of 20-40 loans, nobody wants to go through each loan individually.

The good news is that there are some larger lenders that keep most of their  
loans. If your credit is strong, your down payment is large enough, and your  
house appraises well despite the heating deficiency, you may find a lender who  
will be willing to blow off being absolutely strict on the FHA guidelines. If  
you have a mortgage broker, he/she should know at least 2 or 3 such lenders off  
the top of their head. 

I got my loan through Chase, and I believe GMAC also keeps a large percentage  
of their loans.

Good Luck
Bennett