Does Going With Conventional Financing Avoid Having To Make Required Repairs?

If FHA/ USDA/ VA loans require repairs to be completed prior to closing, why not just switch to a Conventional Mortgage? As long as the buyers qualify, we won't have to worry about doing any repairs to the home.  Besides, many of these homes are foreclosures, and many banks, Freddie Mac, Fannie Mae, HUD, and others won't allow the properties to be touched prior to closing.  Wrong!

The appraisers have been going through a scrutiny as of late.  The level of responsibility to report accurate and concise information of the homes, has increased exponentially.  Appraisers are being told that they can be held liable for any unreported issues, so appraisers are now required to take pictures of every room in the house, and they must note any unusual abnormalities that can effect the marketability of a home.

They must give the home a Quality rating, too.  They are given a rating of  C-1 to C-5. A rating of C-3 is considered average.  When the Conventional appraiser reviews the home, they are still taking pictures and making notations of things like: Stains in the carpet, water stains in the ceiling, holes in the wall, missing molding, broken windows, water in the basement,etc.  Even though none of these is structural in nature, banks are requiring these items to be fixed because they are concerned about safety and soundness issues with the property.  The average quality rating is expected, and anything below that rating requires repairs to be made before the buyer can take possession of the home.  Once these repairs are completed, the appraiser must go back out to the property and reinspect it for the bank.  The appraiser verifies that the Quality rating is up to average.

There are two ways that this situation can be dealt with.  Either the buyer does the repairs on a home that they don't own, which can be time consuming and unacceptable to a seller, or they can apply for a rehabilitation loan.  A rehab loan is one where a buyer obtains an estimate of repairs from a contractor, our bank holds the amount of money in an escrow account.  Once the required repairs are complete, the bank pays the contractor direct for the repairs, or reimburses the buyer once they have been shown that have been completed.  Most lenders can't do any type of Rehab loans, or they offer the FHA 203K, which is arduous and expensive.  I can do a standard conventional rehab loan, requiring as little as 5% down payment.  Regardless which way you want to go, please know that switching the type of financing to Conventional doesn't promise any different outcome.

Andy Williams
President
Abacus Regional Mortgage
484 695 5972
NMLS # 118317
www.abacusmort.com

Ask the "Mortgage Man": Effective Financing for Foreclosures with NO PMI i...

Ask the "Mortgage Man": Effective Financing for Foreclosures with NO PMI i...: Do you ever see a property cheap enough to buy, but needs thousands of dollars in minor cosmetic repairs?  You don't have much money for...

Effective Financing for Foreclosures with NO PMI insurance!

Do you ever see a property cheap enough to buy, but needs thousands of dollars in minor cosmetic repairs?  You don't have much money for a down payment because you want to save some of your money to fix up the home.  Usually an FHA loan is the best way to finance a property so that you can keep your down payment to a minimum. FHA requires certain repairs and defects to be completed prior to a new buyer taking ownership of a property.  Perhaps it is a bank-owned property who won't allow you to make any repairs or alterations to the property prior to taking ownership.  A simple solution would be an FHA 203K loan.  This product allows a buyer to finance the required repairs into the mortgage, with all of the work being done after the closing.
Lately, more and more people are upset about FHA's version of PMI insurance.  It is called Risk Premium.  It is the most expensive monthly PMI insurance on all types of mortgages.  The cost is anywhere between 125% to 250% higher than PMI insurance on conventional mortgages.  We offer conventional loans with as little as 5% down with NO PMI insurance.  Since most conventional mortgage underwriters normally don't call for cosmetic repairs to be completed prior to closing, this is a better alternative with properties that don't need major structural repairs.  So if you don't want PMI insurance on your loan, and wish to do as little as 5% down payment, this is a better alternative for many buyers.

Andy Williams
NMLS #118317
President
Abacus Regional Mortgage
NMLS # 113984
(484) 695 -5972
www.abacusmort.com