Should You Buy a House With a Bad Roof?

So, you've found a house to buy and you love everything about it -- but the roof is in poor shape. The roof might be leaking, or might just be really old.

If that's the case, should you move forward with the home purchase? There are three things you'll need to consider when making this important decision.

1. You could have a hard time getting a mortgage

There's one really big issue you're likely to encounter if you try to buy a house that has a bad roof: You are likely going to have a hard time getting a mortgage loan.

See, the home you buy is collateral for the loan. It guarantees it, because if you don't pay, the lender can foreclose and sell the house to get the money you owe. But if a house has major health and safety issues -- like a bad roof -- then it's bad collateral and lenders won't want to provide a loan for it.

A mortgage lender doesn't want to get stuck with a home that needs a new roof, and many lenders worry that a bad roof could be hiding major problems like mold caused by leaks -- which could prompt homeowners to walk away once those issues are discovered.

As a result, if the roof has less than two years of useful life left on it, some lenders (especially those offering FHA loans) may require it be replaced prior to closing. If the sellers won't do that, you may not be able to move forward with the home purchase.

2. You may not be able to insure the home

Many home insurers also will not provide coverage for a house that has a bad roof on it. That's because it's concerning to them that the house may be at risk of structural damage due to leaks. You may need to pay a lot more for a high-risk policy -- at least until you're able to get the roof replaced.

3. You could face expensive costs for a new roof

There's another issue with buying a house that has a bad roof. You're going to need to fix it once you've become the owner and moved in. After all, you don't want to live in a home that leaks.

Fixing the roof could cost tens of thousands of dollars. It may be hard to come up with this money right after paying all the costs associated with buying the property in the first place.

So, does it ever make sense to buy a house if the roof is bad?

These three big downsides all need to be considered when you're deciding if you should purchase a house with a roof that's not in good condition. But that doesn't mean you should never consider purchasing a property where there is a roofing issue.

In some cases, you may be able to negotiate with a seller to fix the roof before closing -- especially if you're willing to pay a higher final price for the property. Or it may be worth buying a home with a bad roof if you get a great price on it. If you could pay for the property and pay for the roof and get the house at a good price after covering both costs, it may be worth moving forward.

If you do decide to buy a house with a bad roof, you'll need to either pay cash or look for a lender willing to work with you. Home rehabilitation loans for fixer uppers could be one option, or you could find a lender willing to allow a repair escrow. This would mean the money for the repairs is put into a special escrow account at closing and not released until the roof is fixed.

Before you pursue these approaches, though, be sure you know exactly how much the new roof will cost and make sure that moving forward makes financial sense. A roof replacement is a big undertaking, and this decision isn't one to be taken lightly.