Background information:
This will be my first home purchase, i have been pre approved and prequalified to use South Dakota Housing Authority (SDHA) FHA mortgage. i made an offer and there is a clause in the offer that says it is contingent on my final approval of SDHA FHA mortgage. The list price on the home is 85,900 and i offered 75,000 with seller contributing 3% to closing and seller paying 50% of title fees and a $500 home warranty. they countered a couple times and i countered a couple times and we agreed to 77,500 with all other terms the same. So i feel like im getting a very good deal. I also already put $500 down as ernest money thats been cashed and will go towards closing.The banks appraisal should be coming in any day and i'll have a better idea of the house value then. I have roughly $4,000 saved up, but since this is an older home (built in 1890) and it has been renovated and brought up to code and is very very nice for the time period however i just really want to be able to keep as much of my savings as possible in case of emergency's or repairs needed. i've already had the house inspected and that is getting paid through closing.
The Problem:
I really really really want this house and i think i'm already getting a really good deal on it, Closing is scheduled for 09/11/2014 and yesterday my mortgage broker called me and said that US Bank is the servicer for all of the SDHA FHA loans and that they will not accept my loan because of my DTI. However my broker says that i qualify for the SDHA FHA loan through all of the SDHA FHA guidelines and requirements, its just that the servicer will not accept the loan. The largest benefit SDHA FHA loan was giving me that i will be losing is a 3% gift from the state used towards closing costs. so with this money and the sellers contributions i was going to end up having about $700 out of pocket to pay at closing.
Banks Proposal so far:
So far the bank has said they have me approved for a straight FHA mortgage and i would still get a $2,000 tax credit as a first time homebuyer in south dakota. This is a big deal for me and would be a potential dealbreaker if i lost this, but the bank says i will still get this. They are giving me a lower interest rate of %3.75 instead of the %4 that i was going to get through the SDHA loan. They are keeping the payments about the same but he says i would need about $2000 at closing which would eat up half my savings. My broker says i can get some "lenders credit" if i want where they will gift me money at closing in exchange for a little higher interest rate. My broker says this is basically the same thing the SDHA FHA mortgage was doing by giving me the %4 and 3% gift towards closing.
My Thoughts:
i'm thinking that since the bank is not allowing me to use the SDHA FHA mortgage that is stipulated in my purchase contract that i could void the contract if i wanted to. My thoughts on this is that i cannot be forced to take another loan that will cost me more money out of pocket. Im thinking that either the bank needs to find some way to get the terms to be pretty much the same as the SDHA FHA mortgage would have been with me paying as little out of pocket as possible.
My Questions:
Do i have a way out of this purchase contract since it says SDHA FHA loan and i only qualify for Straight FHA now?
If this purchase contract has to be rewritten or redone since that loan is not going to go through, could i offer less money or ask for anything else from the sellers to make up for it? What could i ask for? Since i qualify for the mortgage program can the lender really choose not offer the loan because a future servicer wouldnt accept it? Im really confused as to what i should do here? do i just bite the bullet and pay whatever they say for closing? Should i try to fight them to reduce closing costs and what can i ask for?
