USDA - Borrowing 102% Appraised Value?

[Boldilocks]

We are doing USDA Guaranteed. 

The seller accepted $124,000.  The appraisal came in at $126,500, so that plan was to borrow 102% of the appraised value, bumping the loan to $129,000 - seller to net $124,000 and $5000 towards closing costs.

Now the Loan Officer is saying that the loan can only be $126,500? 

When I asked about the 2%, he said he can only add that to the base loan.  I thought that was the base loan...?

I feel like an idiot and very confused.

Can someone explain it to me, I hate feeling stupid and not understanding.

[frugalQ]

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@Boldilocks wrote:

We are doing USDA Guaranteed. 

The seller accepted $124,000.  The appraisal came in at $126,500, so that plan was to borrow 102% of the appraised value, bumping the loan to $129,000 - seller to net $124,000 and $5000 towards closing costs.

Now the Loan Officer is saying that the loan can only be $126,500? 

When I asked about the 2%, he said he can only add that to the base loan.  I thought that was the base loan...?

I feel like an idiot and very confused.

Can someone explain it to me, I hate feeling stupid and not understanding.

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I believe what the loan officer is saying is that he can add 2% to the base price of 124,000.  The loan cannot be more than the appraised value.  2% of the base price of 124,000 is 126,480....which is the appraised amount.

[Boldilocks]

Well that would make sense.

The base price isn't $124,000, though, it's $126,500.  In the original GFE they didn't use the seller-to-net price of $125,000 (which has changed to $124,000 now) as the base price, they used the full purchase offer of $132,500 - assuming it appraised for that.

These figures changed from the purchase offer - which was $132,500.  That was seller to net $125,00 and $7500 towards closing costs.  My  Itemized worksheet and GFE showed that the loan amount could go up to $135,150.  When I called and asked about that saying the loan was only supposed to be $132,500, the LO said that if it appraised for $132,500 then we could add 2% on, taking it to that figure quoted. 

But it didn't appraise for enough.  So I was applying the same logic to the actual appraised figure of $126,500.  The purchase offer is $129,000, with seller contributions of $5000.  So the $124,000 (what the seller gets) is implicit, but the stated purchase price of the house is $129,000.

[Boldilocks]

OK, had a eureka moment (I think).

 The purchase offer needs to be $126,500 , and as long as it appraises for this (and it did), then we can borrow 102% which brings it to $129,000.  Right?

But the contract needs to say $126,500, not $129,000.  Is that correct?  Seller to net $124,000 and $2500 towards closing costs.

Please tell me I'm finally getting it.... :-)

[frugalQ]

I didn't know that you can borrow more than what the house appraises for.

I think the loan officer is using the loan base price...which technically the selling/accepted price of the house less any downpayment.

[Genkeim]

USDA allows 102% of appraised value because they allow you to roll the USDA fee into the loan.

[ShanetheMortgageMan]

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@Genkeim wrote:

USDA allows 102% of appraised value because they allow you to roll the USDA fee into the loan.

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Winner winner.  It's actually a little higher than 102% if you finance the USDA guarantee fee in (102.04%), because of the way the USDA fee calculation works when you are financing it.  But that is the reason why 102% LTV is allowed.