How to Buy a Home with a Bad Roof - New York

[Anonymous]

Long story but we had an offer accepted on a house.  We had planned to finance using a USDA Mortgage.  The appraisal came back fine except the appraiser seems to be indicating that the roof needs to be replaced.  The seller is not willing to repair the roof (likely doesn't have the money to do so).

 Because of this, USDA and FHA are likely out. 

 If we go conventional with 5% down, we'd have just enough for the closing costs and down payment (plus enough to do the roof shortly after closing but not enough for the 1.5x Repair Cost Escrow most banks seem to be requiring).

 I talked to a lender about FHA 203k Rehab mortgages today but closing costs/prepaids/downpayment came in at a point where I would be uncomfortable with cash on hand.

 Any ideas?

Thanks!

[ShanetheMortgageMan]

Has a licensed roofer gone out there and said it needs to be replaced?  The underwriter just doesn't go by the appraiser's recommendation, as the appraiser isn't a licensed specialist (in anything other than being an appraiser).  They will always refer to get a licensed specialist in the area that the issue is, i.e. if electrical doesn't seem up to code per the appraiser, then a licensed electrician will need to review.

The closing costs should be the same for USDA Guaranteed or an FHA 203(k).  The cost difference on a FHA 203(k) vs. regular FHA is only an additional 10% contingency and usually $300 in on site inspections, all of which can be financed into the loan amount (assuming the home appraises).

If there are lender required repairs, then it seems you have a pretty good understanding of your options:  you find a different property, the seller fixes them, you fix them, you close and a holdback for 1.5x the amount is held back until after repairs are completed, or you get a rehab loan and finance them. 

FHA permits you to get a loan from a family member, so if the "funds to close" are difficult to come up with and you have family willing to help you out, then you could get a loan for the funds you are having difficulty coming up with and pay your family member back over time.