I really need some sound advice-fast. We are buying an REO home. All along our Realtor knew the house would probably need to go streamline 203k. The realtor even wrote the contract up as FHA 203k or rehab. For some reason our loan officer tried to push it regular fha. We didn't realize this until recently. The underwriter looked at the appraisal & our loan officer said that we need to fix everything prior to closing in order to go regular. Our LO says that 203k's are a pain & that we don't want to have to go that way & she doesn't want to do it 203k. This is our first time buying a house like this. We do not feel comfortable putting a dime into a house that we don't own. The bank who owns the house have agreed to let us do the repairs prior to closing if we want to. I do not have a good feeling about this. Can I ask the underwriter for written contigencies so I know exactly what they want? Should I find a different loan officer that wouldn't advise us to do this or should I just tell them we want to do the streamline 203k? Damages are under $15000. I think it would be stupid to put money into a house that isn't ours yet. Our LO assures us we are approved and that we just need to do the repairs before closing. Everything has been done, appraisal, inspections, title-everything. Are streamlines really that big of a hassle? If we agree to do the repairs prior to closing can the bank/underwriter give us some kind of guarantee & are we entitled to receive contingencies in writing? Our LO has been dodging 203k from the beginning. Is it common for buyer to put money into home before closing?
My daughter ran into the same situation when she purchased her HUD home in October. She ended up with a 203b? that gave her 5000 toward the repairs. However no one told us that she had to do the repairs and then get the money from the mortgage company. The furnace guy was willing to do the work and wait. We ended up doing the PEX plumbing ourselves. (hers had been ripped out all copper). I ended up spending about 3000 (which in turn ran up my cc's and now will probably delay me applying until I can get my utilization down) as we needed to buy the supplies to fix everything. We went way over the 5000.00 but Mom and Dad forked it over She is still waiting for her refund to finish up the cupboards in the kitchen and fix the roof and a window.
She also was told that the 203K one is difficult to do and takes longer. That is because all the repairs have to be done by licensed contractors and approved by HUD before the funds are released. It involved getting bids, getting 1/2 of repair, submitting final cost, and waiting for final 1/2 of funds. Loan closing was all messed up by this. So we went with the other 203 loan.
That's so weird....I just got on here to ask the same question!!! Put a contract on house yesterday and offered to pay to have the furnace and water heater installed/repaired before closing if they accepted offer and I could go fha. The only things (other than minor cosmetic) that would have to be done (per fha).
Yes---there is risk, but my financing is fine and I have the money to do it.
Same situation as op---REO home. They refused my offer based on fha financing! Looking into Conventional loan now for same house.
It is definitely not common for the buyer to put money into a home prior to buying it.
If the real estate agent was saying it was likely going to need repairs before closing, and the loan officer was aware of this but was too lazy and pushed for the 203b instead (203k's do involve more but it's not that complicated), and then is now coming back and is telling you to spend $15,000 to repair a home you don't even own yet - the loan officer should be canned. I'd actually be offended if my loan officer recommended that to me if I was in your situation.
What all repairs need to be done? Can they fit within the streamline 203k or does it need to be the full 203k?
If it can't be done, and you don't mind spending the $15k on a home you don't own, then I'd get a complete list of all conditions the underwriter wants satisfied before you spend one penny. I would request the loan officers manager/supervisor check it out, as it's apparent your loan officer has no foresight. The list should be final but the underwriter always has the right to add more conditions, the lender won't be signing any contract with contingencies that's for sure.
Thanks for responding Shane! I was hoping you would chime in. The repairs include new water heater, repairing roof, patching holes in vinyl siding, treat for termites (tunnel found in basement), new carpet thru out, paint every room in house (due to spray paint damage), new drywall in one room & several walls to patch & several other cosmetic things. I already had 2 licensed cont. come & give estimates because we thought we would have to go streamline 203k all along. The repairs/damages are under $15,000. She knows this. I would switch to another LO, but I am afraid it would take longer. I told her yesterday before we spend a dime that I wanted all contingencies from the underwriter in writing. She blew it off & said just get started on the house so we can close. I want to know exactly what contingencies are required. I don't want to do xyz & they say well you didn't do abc. What do you suggest? Should I speak to her boss? Is streamline 203k under $15000 really that much trouble? I already have 2 estimates etc. The house really needs to go 203k streamline. What should I do?
If the lender your loan is at also does the 203k streamline, the process to switch it to a 203k streamline shouldn't take that much extra time... perhaps another week if everyone is on their game. If contractor's are slow, or the appraiser can't make it out there again (because they need to do a value calculation on what it'd be if the items were repaired/replaced), or if the lender you are with doesn't offer the 203k streamline (not all, or even most, lenders do) etc. then that would slow things down.
Everything you've listed should be able to be done with the 203k streamline, and the maximum repairs on it are $35k so your $15k estimate is well within them. You definitely need to talk to the LO's manager, every time you talk about your LO is just disgusts me more and more, please only talk to the LO's manager. If the LO has information the manager needs, have the manager get it, not you. LO doesn't seem to have your best interests in mind at all.
If they don't have a 203k program (perhaps that is the reason they were steering you towards the 203b, because they can't even do a 203k) then you'd need to start finding a new lender who can do a 203k loan, find out how long the process would take to switch over, and then go back to your real estate agent and the seller to ask if they would accommodate the switch to a new lender in terms of allowing more time for you to close.
Requested all conditions in writing. Here is what LO sent: top of paper says LOAN STATUS, under that it has the apprasied value, the purchase price; along w/name of u/w, appraisal reviewer, loan # etc. Then at bottom has Fax all prior Doc conditions to:,
Prior To Doc Recvd Sign off
4 In order to better serve you, please provide all conditions in 1submission.
5 Complete address for "bank" on both addendums to final approval.
6 FHA appraisal by Bob White see additional conditions.
8 'banks name" to obtain verbal voes.
10 Documentation suffient funds to close
16 Property Flip Waiver to be completed by broker mangemt to review when complete
17 Remaining economic life & site value on pg. 3
I don't understand what this means at all. LO said she would explain, but hasn't yet. I ask for complete list of conditions from underwriter. what is this? Did LO give me what we requested? I have rq. several times all conditions/contingenices in writing that will satisfy underwriter so we know what we need to do.
Perrrrfect... that is exactly what you needed.
#4 is saying don't send 1 item at a time, send them all at once (this is to prevent longer underwriting turn times)
#5 i'm not really sure but putting an address on something is hardly ever an issue
#6 is just the appraisal
#8 is a verbal verification of employment (VOE), where they call to confirm you still are employed
#10 is where they need to make sure you have enough money to close (so whatever amount of money is needed at closing from you, the underwriter will need to see that on a very recent bank statement, etc.)
#16 because it's a bank owned home the time the bank has owned it hasn't been very long, can be a problem but FHA is OK with it since it's bank owned (if it was an individual investor/homeowner who was reselling so soon there are some guidelines to know)
#17 is just adding the remaining economic life & site value on the appraisal, a common requirement on FHA appraisals
Sounds like it really is just this one issue with the condition of the home. Does your mortgage broker have a 203k program for you?
Shane, we appreciate you taking the time to respond & your guidance! Thank you!
LO does have a 203k program, but is trying to go regular. We have replaced water heater & had busted pipes fixed. Home was vandalized w/spray paint thru out. We have removed all spray paint off everything & painted 2 rooms & patched all holes in drywall in those rooms. We also put rain cap on chimney & a few other things. The appraiser is coming Thursday (Feb.. 12) to re-inspect everything. Last week LO said if we did the work before closing we could go regular fha & close on time (Feb.. 16). We did all of the work needed; now she said we probably need to ask for a 2 week extension to be safe. How long should this take to close after everything is submitted to the underwriter? We agreed to this because she said if we did, we would be able to close on time w/out extension. She has us going thru FAMC reg., & thinks it will now pass, she uses Freedom for 203k. Our debt ratio is very low & scores are low 700's. Income is good & job time is 16 plus year. Interest is 5.5. What do you think? I just want to close. How long do you think it will take to get closing date set after u/w has all docs & appraiser's report? We have the homeowners Ins. set up & all title work & VOD & VOE have been done.