FHA & Property conditions

NEW -> Contingent Buyer Assistance Program
O

OCcubanita_IHB

New member
Hello -



I placed an offer on a REO that was accepted by the bank. The property needed a lot of work (the flooring had been ripped out in the bedrooms and living room). My dad is a pretty handy person and was going to help me place flooring down once escrow closed. When it came time to start working on my loan package and get someone in to inspect the property, I got word from my real estate broker and mortgage broker that the property would not be able to get FHA financed due to the fact that the property had no flooring. (Originally I was told that the property just had to be structurally sound to be FHA financed.) My real estate broker went back to the bank's listing agent and was told to pretty much "pound sand" (The bank listing agent's exact words were - "talk to another underwriter or lay down some throw rugs" and my mortgage broker had already talked to two separate FHA underwriters by this point). He was unwilling to work with us to get cheap flooring installed to pass inspection. In the end I had to back out of my contract as the property was unable to be financed. The property is still sitting out on the market and am bummed because it is exactly what I was looking for. Is there a way around this? The property is owned by Bank of America which makes me even more angry because they've received monies from the Feds (aka taxpayers) and yet they won't make any "improvements" to help this property get sold. I'm just so frustrated and wanted to get other people's opinions on this.



For background information, I am using FHA financing as I am a first-time buyer with not a lot of cash to put down. I have already been pre-qualified for a loan by two different lenders and my real estate broker was upfront with the bank/bank's listing agent when we put in an offer that I would be using FHA financing.



Thank you in advance for your thoughts and opinions!
 
Your screwed. Somebody will have to fix it before FHA will finance it. I'm not putting a penny into a property without a title in my name.



This is why nobody used FHA in the runup. There were a ton of hoops to jump through, and they made you do every one. Who had time?
 
Yes, you can put in a new floor at your own risk... but i would not recommend it. Otherwise you could also just get a "regular" loan and start saving some more. Maybe BofA can make you a deal to get the house out of inventory. Try to be inventive.... good luck.

-bix
 
ya, what bix said.



i heard that bofa was making 5% down loans. see if they will do a 3% down loan for you to take the reo off their hands!
 
I've heard that with FHA loans, an escrow account can be set up for the things that need to be fixed. VA won't do this, but supposedly FHA will. Essentially, you or the seller would put the money into an escrow account for the repairs needed to pass. I would not spend a dime on it until escrow closes and I don't think the bank would let you do it either. They have something in their addendum about liability so no one is allowed in the house except for you with your agent. I had to reschedule a contractor because escrow wouldn't confirm the recording until later in the day.



On the B of A thing, I"m not sure they are doing 95% for purchases on their no fee mortgage plus. I've been talking to them about a refi and they told me today that the 95% was only for refi's. I think for purchases it's still 10% down minimum unless it's FHA.
 
This is the problem: Mortgage brokers and RE agents haven't been doing FHA loans in OC for years, if ever. So in a market that typically does FHA loans, both the agent and the mortgage broker would have known right off the bat that not having flooring would make closing a FHA loan impossible.



As for a solution: Talk to B of A yourself, and skip the agent. Tell them you own their stock and won't hesitate to short the hell out of it if you can't come up some sort of solution. Oh, and tell them you know where Ken Lewis lives and that you will show up at his door with John Thain. That last one really should do the trick.
 
Graph,



Is the escrow account not an option? Our realtor had us talk to her mortgage broker, who wanted to put us into an FHA loan. One of the houses we were looking at was potentially going to need a new roof and the mortgage broker said that we could have the seller (or I supposed us) put the money for the roof into an escrow account that would be disbursed to a roofer. I wasn't a big fan of the FHA loan.... the fees were close to $14,000.
 
The Federal Housing Administration has a pretty substantial FAQ sheet with an enviable search function.



<strong><a href="http://www.fhaoutreach.gov/FHAFAQ/">FHA - California - FAQs</a></strong>



This may be of use:



<em>Can the cost of repairs be financed when calculating a purchase transaction?





Answer

Repairs and improvements required by the appraiser as essential for property eligibility and to be paid by the borrower may be added to the sales price before calculating the mortgage amount. (The appraised value will reflect these requirements.) For the cost of repairs and improvements to be eligible for inclusion in the mortgage amount, the sales contract or addendum must identify the borrower as responsible for paying for or otherwise completing the repairs or improvements. The amount that may be added to the sales price before calculating the maximum mortgage amount is the lowest of: a. The amount the value of the property exceeds the sales price; or b. The appraiser's estimate of repairs and improvements; or c. The amount of the contractor's bid, if available. Only repairs and improvements required by the appraiser may be included. Any repairs completed by the borrower on the property before the appraisal is made are not eligible for inclusion in calculating the maximum mortgage. The amount that cannot be financed into the mortgage will become part of the borrower's required cash investment. If repairs cannot be completed before loan closing due to weather-related delays, the lender must establish an escrow account to ensure eventual completion of all required repairs. See HUD Handbook 4145.1 REV-2 for details. Weatherization and energy efficiency improvements may be included if they qualify. If the weatherization items cannot be completed before loan closing due to weather-related delays, the lender must establish an escrow account to ensure eventual completion of all items. See HUD Handbook 4145.1 REV-2 for details. The amount that may be added in calculating the maximum mortgage is: a. $2000 without a separate value determination; or b. Up to $3500 if supported by a value determination by an approved or FHA roster appraiser or DE underwriter; or c. More than $3500 subject to a value determination by an approved or FHA roster appraiser or DE underwriter and a separate on-site inspection made by a FHA-approved fee inspector or DE staff appraiser. The cost of solar energy systems may be added directly to the mortgage amount (before adding the UFMIP) after applying the LTV ratio limits. The statutory mortgage limit for the area also may be exceeded by 20 percent to accommodate the cost of the system. The amount that may be added to the mortgage is limited to the lesser of the solar energy system's replacement cost or its effect on the property's market value. Both active and passive solar systems are acceptable, as are wind-driven systems. See HUD Handbooks 4150.1 REV-1 and 4930.2 for details. When purchasing HUD-owned property using FHA financing, 100% of the repair escrow may be financed.





Reference

Handbook 4155.1 REV-5, Section 1-7; Mortgagee Letter 00-27; Mortgagee Letter 05-50' </em>
 
You must log in or register to reply here.
Back
Top