Reply
New Member
Posts: 2
Registered: ‎06-27-2014
0

FHA Mortgage Question

Hi All,

 

Long time lurker, first time poster. Thanks for all the great advice, really don’t think I’d be at this point without all the helpful information! I was wondering if anyone else has going through something similar to my current situation. After following advice on the credit rebuilding board I was preapproved for my first mortgage (FHA)…(hooray!). My wife and I found a house, Offer was accepted, went through all the back and forth with inspection and all the other “fun” stuff…

 

Fast forward to last week, our contract closing date is 6/30/14 and we were still in underwriting. I called the LO and he came back later that day with a conditional approval letter pending 9 items. We completed those items and sent them back to the LO. This afternoon (it’s Friday and closing theoretically should be Monday) he called and let me know that the conditions have all been approved, however (here’s what he emailed me when I asked for it in writing to forward to my lawyer);

 

Hello YYY,

 I have heard from the underwriter.  After review of the documents that were submitted by you and the seller, she is asking for a second appraisal on the property.  Per FHA guidelines the since the property was last transferred less than 180 days ago and the amount of funds the sellers have placed into the property, a second appraisal is required.  I can order the appraisal today, but this is an additional fee for you.  I just need your authorization to order the appraisal.

 Thank you,

XXX

 

A little bit of background info, this is a Flipped property which the seller bought for 140K, My mortgage will be for 236K. The first appraisal came back at $244K. The seller purchased the property Jan 15, 2014

 

So I’m assuming that my closing date is shot, and I’m not going to be able to talk the bank out of ordering a second appraisal, (I’m actually an underwriter myself (insurance) and thought for a second about trying that lol…). I don’t understand why I have to pay for the second appraisal, and I’m also worried about the seller backing out of the deal if we have to wait weeks for a second appraisal. Any advice would be appreciated!

Valued Contributor
Posts: 2,592
Registered: ‎08-24-2013
0

Re: FHA Mortgage Question

Your closing date is only as good as the lender will make it. They want a 2nd appraisal and so there's nothing that you can do but wait.

 

What I don't understand is what they expect to gain from a 2nd appraisal? If a lot of work was not done to the property, the value presented in the first appraisal should not be different. Sounds like the lender is more curious about the price paid by the flipper vs the price you are paying ... with no significant improvement. That is a "head scratcher".

Valued Contributor
Posts: 2,682
Registered: ‎07-29-2009
0

Re: FHA Mortgage Question

Have you been in contact with your realtor to notify him or her? Sounds as if you need to know whether or not your seller will hang in there. If I were you, I would want an extension in writing signed by the seller before committing to pay for a new appraisal.

 

This is one of the underwriting risks in buying a flipped property.

 

Also, as you are learning, closing dates are pretty much meaningless to mortgage brokers/bankers.

Community Leader
Super Contributor
Posts: 6,456
Registered: ‎03-06-2010
0

Re: FHA Mortgage Question

[ Edited ]

Jazzzy wrote:

Have you been in contact with your realtor to notify him or her? Sounds as if you need to know whether or not your seller will hang in there. If I were you, I would want an extension in writing signed by the seller before committing to pay for a new appraisal.

 

This is one of the underwriting risks in buying a flipped property.

 

Also, as you are learning, closing dates are pretty much meaningless to mortgage brokers/bankers.


^^^ I can tell you for sure though that the second appraisal is only required by FHA for sales within 90 days, not 180 days so this is your lender's overlay. Get the extension in writing right away. Flipped properties do go through more scrutiny and there are limitations as to what FHA will allow for the new price (100% over original purchase is max). Normally the seller has to provide the list of improvements made and the costs for each improvement (itemized) to the appraiser

Super Contributor
Posts: 8,362
Registered: ‎09-28-2007
0

Re: FHA Mortgage Question

If property is being sold between 91 and 180 days of the seller’s acquisition and the sales price increases by 100% or more, a second FHA appraisal is required (this applies to all purchase transactions, regardless of seller’s property flipping exemption status). The only exemptions from this second appraisal requirement are for properties located in a presidentially declared disaster area or properties inherited by the seller within 91 and 180 days of the borrower’s execution of the purchase agreement.  Generally if the value indicated on the second appraisal is more than 5% lower than the value indicated on the original appraisal, the lower value of the second appraisal must be used to calculate maximum loan amounts and LTV.  FHA is pretty clear that the cost of the second appraisal may not be charged to the borrower though.

New Member
Posts: 2
Registered: ‎06-27-2014
0

Re: FHA Mortgage Question

Thanks for the responses everyone. We extended the contract with the seller for 2 weeks and should be all set from that standpoint.

 

Shane, do you have a link or information regarding the FHA guidelines that mention the buyer should not be paying for the second appraisal? The bank is holding firm that the cost of the second appraisal falls on me, and while I’m not going to walk away from the deal over it, I’d rather be spending that money on just about anything else!

 

Thanks again everyone and have a great week!

Super Contributor
Posts: 8,362
Registered: ‎09-28-2007
0

Re: FHA Mortgage Question

New Member
Posts: 2
Registered: ‎07-03-2014
0

Re: FHA Mortgage Question

Forgive the new username, I managed to completely forget my password...:smileysad:

 

Wanted to say thanks Shane! I was able to get the Director of Lending for the bank (it's a small regional one) on the phone. We discussed everything that has happened so far and I went over the documents Shane shared with me. He asked me to give him an hour. He called me back in 45 minutes and apologized and said they just paid for a rush second appraisal (it's scheduled for 9am today)!!!

 

Have a great 4th everyone!!!

Community Leader
Super Contributor
Posts: 6,456
Registered: ‎03-06-2010
0

Re: FHA Mortgage Question

Congrats! At least you were able to reach someone who had the authority to fix it :smileyhappy:

Super Contributor
Posts: 8,362
Registered: ‎09-28-2007
0

Re: FHA Mortgage Question

Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
† Credit cards for FICO Score ranges: The score ranges are guidelines based on actual applicant approvals and having a FICO Score in a particular range does not guarantee you will be approved for credit cards recommended in that range.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.