What are the Mortgage Rules for Knob and Tube Wiring?
When home buyers hear that a home has Knob and Tube wiring they are often told that this might be a problem with their ability to get approved for a mortgage.
This is not necessarily true. You can get a mortgage for a home with Knob and Tube Wiring.
What is Knob and Tube Wiring?
Knob and Tube wiring is an electrical system that employs a system of insulating ceramic knobs that anchor the electrical wires of the home. These ceramic knobs are anchored directly into holes that are drilled into the joists of the home. This was the most common home electrical system up until the time of World War 2. Most older homes that initially had Knob and Tube wiring have since been upgraded to more modern electrical systems but sometimes you will run into a home that still has the original Knob and Tube system. This is not a problem as long as the Knob and Tube wiring is safe and operational.
Here is an example of what Knob and Tube looks like…
Can I get a Mortgage on a Home that still has Knob and Tube Wiring?
Yes, you can get approved for a home with Knob and Tube wiring.
The underwriting guidelines for all of the major mortgage agencies (Fannie Mae, Freddie Mac, FHA, VA, and USDA) all allow for Knob and Tube wiring as long as the system is deemed to be safe, functional, and typical for the area.
Generally a home that still has Knob and Tube wiring is located in an area that has similar older homes. Often when the appraiser makes note of the Knob and Tube wiring, the underwriter will follow up with a request that the Knob and Tube be inspected by a licensed electrician to confirm that the system is safe, operational, and can support at least 60 amps of power.. This is an inspection you would want to have done anyway. Modern homes require higher amp loads than homes needed 80 years ago. Most people who buy Knob and Tube homes upgrade the electrical system shortly after moving in.
When obtaining a mortgage for a home with Knob and Tube wiring you have three options
1) Buy the home and replace the Knob and Tube at some point after moving in
2) Live with the Knob and Tube system and enjoy living in a throwback era
3) Include the costs of replacing the Knob and Tube into the new mortgage
If you want to include the costs of replacing the Knob and Tube into the new mortgage, this can be done with the use of a Renovation Mortgage with programs such as the FHA 203K or the Fannie Mae HomeStyle. These programs allow to include the costs of the electrical upgrade along with many other possible renovation costs into one closing.
These Renovation Mortgage programs follow the following steps…
1) You obtain bids from licensed contractors for the renovation costs
2) You buy the house
3) After the closing, you then begin the renovation with the funds set aside by the renovation mortgage