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USDA Direct after BK... CLOSED!!!

Regular Contributor

Re: USDA Direct after BK... Here's my story

03/05/2014 - I recieved an "appraisal letter" from the USDA. It seems the USDA (shockingly) jumped the gun and ordered an appraisal of the home before we even had a finalized contract.

 

The letter states, "Based upon your repayment ability and our appraisal, we have determined we would be willing to loan up to $(contract price). THIS IS NOT TO BE CONSIDERED APPROVAL."

 

The letter also included a list of required repairs: "Interior of the garage and the house is in need of fresh paint and minor sheetrock repair."

 

I immediately called the USDA office to ask about closing costs, since the letter says the appraisal came in exactly at our contract price. I also asked her why she ordered the appraisal while we were still in attorney review. It turns out that the appraisal came in at $1,000 over our contract price. I asked if the additional $1,000 could be used for closing costs, and she told me flat out "No". She told me that closing costs must be specified in the contract if the are to be financed. She also had no explanation as to why the appraisal was ordered prematurely.

 

I have sent her the pages out of the USDA Direct Single Family Housing Loans and Grants Field Office Handbook where it states that the following:

 

6.7 LOAN-TO-VALUE (LTV) RATIO [7 CFR 3550.63(b)]
 
The LTV ratio is the relationship between the amount to be financed, including all leveraged loans and grants, and the market value of the security property. The value of the property is determined using the appraisal procedures described in Section 5 of Chapter 5. A loan may exceed the LTV limitations discussed in Paragraphs 6.7 A. and B. to allow the borrower to finance certain allowable excess costs.For any Agency loan, the amount that can be financed in excess of the allowable LTV includes the Agency-approved appraisal fee, the tax service fee, and the initial contribution to the escrow account.
 
A. Loans for Existing Dwellings (100% LTV)
For existing dwellings, the LTV limitation for a Section 502 loan, plus any other liens on the security property, is 100 percent of value plus allowable excess costs.
 
Example - Maximum Loan Based on Loan to Value Ratios
 
$50,000 Appraised Value
 
$51,740 Total Costs Including:
             $49,500 Purchase Price
             $ 340 Appraisal and Tax servicing
             $ 1,500 Closing Costs
             $ 400 Costs to Establish Escrow
 
If the allowable LTV is 100%, the maximum loan is $50,740 (the appraised value plus allowable excess costs). $1,000 of the closing costs must be paid by the borrower in cash.
 
The maximum loan is the appraised value plus allowable excess costs.

This example clearly shows that the difference between purchase price and the appraised value can be used to cover closing costs. I am still waiting for a response back from the USDA. $1,000 isn't really a big deal, but I'd like to use it for closing costs if possible. The lady at the USDA was adamant that I was wrong, but I think it's pretty clear that I'm right about this. Stay tuned.... just hope I haven't ruffled too many feathers.
 

 

 

Message 21 of 61
Regular Contributor

Re: USDA Direct after BK... Here's my story

And just like that, the deal is dead. Someone else made an offer on the house over the weekend and the seller accepted it. I don't know any details except that it was one of the seller's agent's clients - she's now a dual agent and will earn a double commision on the deal - and that the offer was higher than ours. She wouldn't tell my agent what the numer is, so there's no realistic way we can counter. Since it's in her best interest for this new deal to go through and there's really nothing we can do, we withdrew our offer on the recomendation of our agent.

 

I guess it's back to looking for a house. This sucks.

Message 22 of 61
New Contributor

Re: USDA Direct after BK... Here's my story

Ahhh that sucks!! 

 

same here- the house we loved we were going to make a bid today...but had to wait for my realtor to call usda to see how to write it up. They pulled bidding yesterday- INSTEAD of thursday like the deadline said...so we now have to look at a house 200sqft smaller, the yard is 2000sq ft smaller and it is 10K more.

 

i am so bummed- there are only like 3 houses in our area anyway, and they keep disappearing.

Message 23 of 61
New Contributor

Re: USDA Direct after BK... Here's my story

Dantheman77 did you find anything over the weekend?

 

Nothing here :/ Nothing went on market since last weekend. 

Message 24 of 61
Regular Contributor

Re: USDA Direct after BK... Here's my story

No, nothing yet. It's hard to find anything in decent shape that's big enough for us and is also in our price range. Our intiial 45 days for our COE ends today, se we're getting our first extension. We've decided not to rush things. Even though we'd love to find a house ASAP, in the long run we'll regret buying something that we don't really love just because we felt like we were running out of time. We have another 60 days... if we don't find something within that time frame we'll just start the process all over again.

Message 25 of 61
New Contributor

Re: USDA Direct after BK... Here's my story

I hope you find what you are looking for and won't have to start over!

 

 I am afraid we will just give in so we can get something - hoping to move again in 3 years- but because of the recapture, we need to find something that will build equity for sure. 

 

 

Message 26 of 61
Regular Contributor

Re: USDA Direct after BK... here's my story

You only have to pay the subsidy recapture if the property increases in value. The USDA will waive the recapture if there isn't any appreciation.
Message 27 of 61
New Contributor

Re: USDA Direct after BK... here's my story

oh! That is good to know! 

 

  I feel like we can find something "ok" for now and then in 3 more years maybe we will financially be able to get more then. Even if we do have to do a little bit of recapture. 

 

Message 28 of 61
Regular Contributor

Re: USDA Direct after BK... here's my story


rideswithchrist1 wrote:

oh! That is good to know! 

 

  I feel like we can find something "ok" for now and then in 3 more years maybe we will financially be able to get more then. Even if we do have to do a little bit of recapture. 

 


I would be very careful with this plan if I were you. With 100% USDA financing, there will need to be a substantial increase in your property's value for you to be able to sell within three years and not need to bring cash to the closing table. Personally I don't think it's worth buying something that you can't see yourself living in for at least five years. 

Message 29 of 61
New Contributor

Re: USDA Direct after BK... here's my story

We found one that we can see ourselves in for 5-10 years, or at least until we get money to get a farm/some acerage.

 

How is your search going?

Message 30 of 61