FHA Pre-Approval but Builder is pretty Firm...Looking for any ideas on how to make this work

[sayswho]

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@Student_Loans_Kill wrote:
What are the mid scores for conventional? I think based on my past student loan default I locked into a program with less strict credit requirements, not scores. I should be a member of the 700 club soon, but will still have a billion and one derogsfrom student loans

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Student_Loans:

I have been talking with some of the Credit Unions here in MI and they told me min Mid is 620 but will costs some points.  My mid is 655 so I would be at 2pts at one CU and waiting for a call back from another.  

I wish I could get to the 680 ^ quickly but all funds are needed for new home purchase.  I have no lates or derogs at this time just high utlization.  

[Walt_K]

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@sayswho wrote:

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@creditisbetter2 wrote:

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@Walt_K wrote:

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@sayswho wrote:

Hi All:

Its been a long road to get where I am at now and happy with the results.  

Looking to get advice here as the house we really really want is just a hair out of reach.  We have a preapproval for an FHA loan which is capped at $297k here in MI.  We offerred $300k with concessions and got a response of $315k no concessions.  We are absolutely stretching it especially since the builder is not willing to do anything with concessions.  We have about $15k down which would cover closing costs at $300k (3.5% down plus Closing costs).  Does anyone have any creative ideas that we might be able to try?

We are in MI.

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First, there's still a bit of room between your offer of 300K with concessions and their counter of 315K and no concessions.  Sounds like you might be able to go a little further north, still asking for concessions, e.g. 310K.  Not sure how many times you have gone back and forth with the builder and whether you think this is their true bottom net-wise.  If that is their true bottom, 310K with concessions isn't going to do it, but who knows.

What are you getting as your rate for your loan?  Have you shopped it around enough?  I went to several of the big banks, a broker, and a couple local banks when I was shopping. One of the local banks was able to beat everyone else on the rate, and give me a .875% credit toward closing.  Assuming you're already getting the best rate you can get, if it's not coming with a credit, maybe you take a slightly less favorable rate in exchange for a lender's credit.  A 1% lender credit toward closing could give you some more flexibility. 

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I absolutely agree with Walt, shop shop and shop some more. Never settle for what the builder is telling you. I find it interesting that they are willing to let you go as a buyer than to come down 15k. You have to have a trump card somewhere. Are you going with their lender? That usually includes a lot of closing costs or incentives? We were able to negotiate almost 20k in concessions from the builder and lender. They were at a point where they needed to unload these homes before they could build more so it was imperative to get these off their books. They made whatever deal they needed to in order to get the house sold. Our max FHA was 271 and we purchased for 248 with all closing costs paid and some designer upgrades thrown in for free. Is this house the house you absolutely have to have? Have you put down earnest money? Are you willing to walk away if they say no? Have you talked to some other people who live in the area to get their take on the builder? That was another tactic we used, we talked to some of the other new home owners to see what they did to get the price and features they wanted.

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Thanks all for your responses.  This house is ideal in the sense of size and room numbers.  Its not ideal because the yard will not be completed.  I have made a list and the builder knew what we wanted but was not willing to do anything without a cost.  

I guess, I am not understanding the FHA Limit thing.  So if the cap in MI is $297, I can offer lets say $305 and pay the difference WITH my downpayment?  MY loand officer says his hands are tied at $297.  I have shopped 2 different Mortgage companies.  The rate that I have been preapproved for is 4.375% .  Arent FHA rates the same across the board depending on what day your submitting?

Yesterday I also checked for a conventional with 5% down but my midscore is 25pts off of getting a conventional.  

Thanks again!

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Re the loan caps, I'll let the other poster elaborate.  I was under the impression that the cap was the cap.  I might have read that you can roll your upfront MIP into the loan to exceed the cap (can't remember), but I was not aware of being able to roll other costs into the loan in excess of the cap. 

Re rates, they are not all the same.  Different lenders can offer different rates.  And they can offer credits with the rates.  You should shop around with more lenders.  You don't need to let everyone pull your credit.  Just ask them what rates they can offer with a [your score] midscore.  They will need to pull your credit if you actually move forward with them, but they should be able to quote you rates based on your score. 

You also said utilization is one of the things keeping your score down.  Do you have a family member or friend with a card that has a high limit and long history with no negatives that would add you as an AU.  That would be a quick way to improve your utlization provided the person doesn't use the card heavily, preferably carries a $0 balance.