FHA Roof/termite Question

[hlk1111]

The water damage isnt quite as severe as the pics. But due to ceiling tile and narrow attic hole you cannot really see what is going on. They only want 25k for half of a duplex. The owner will not do repairs because she is not profiting. Selling for elderly couple placed in a nursing home. Also my realtor had me sign some kind of as is agreement. The loan officer says they dont do repair escrows.

 

[J Grant]

https://www.HUD.gov/program_offices/housing/sfh/203k/203k--df

For a normal FHA loan a lender does not do repair escrow. The FHA 203k program is a special program to purchase a home needing repairs see above. Your lender may or may not be doing 203k loans but there are lenders who do.

Purpose:
Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.

For less extensive repairs/improvements, see Limited 203(k). For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD's Title I Property Improvement Loan program.

Type of Assistance:
Section 203(k) insures mortgages covering the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least

 

[CANative]

The water damage isnt quite as severe as the pics. But due to ceiling tile and narrow attic hole you cannot really see what is going on. They only want 25k for half of a duplex. The owner will not do repairs because she is not profiting. Selling for elderly couple placed in a nursing home. Also my realtor had me sign some kind of as is agreement. The loan officer says they dont do repair escrows.

Read the history of the FHA program. It's 80 years old and has not cost the taxpayer one dime. The program is designed to make loans where one or more of the 3 legs of sound lending are less than optimal. So. the emphasis is on the collateral rather than the credit and the capacity. An FHA appraiser worth his or her salt would note this issue and make a repair and/or inspection requirement due to the MPR deficiency.

Perhaps they just have you in the wrong loan program.

 

[Denita Neuenhaus]

Read the history of the FHA program. It's 80 years old and has not cost the taxpayer one dime. The program is designed to make loans where one or more of the 3 legs of sound lending are less than optimal. So. the emphasis is on the collateral rather than the credit and the capacity. An FHA appraiser worth his or her salt would note this issue and make a repair and/or inspection requirement due to the MPR deficiency.

Perhaps they just have you in the wrong loan program.

Usually the buyers' qualifications indicate the type of program for which they qualify. Could be that the buyer needs the higher ratios allowed by FHA loans or it could have to do with the buyers credit score at the time of application. Could be any number of parameters that make an FHA loan better for the buyer.

Having said the above, OP check with your loan officer to specifically find out why you are more suited for FHA than another conventional loan. The loan officer should be able to tell you in just a few words why this program works and the other doesn't. If the LO can't explain it, look for another loan officer at another company. Stay away from big box banks. Go with a knowledgeable LO preferably with a non-bank lender (all they do is mortgages - nothing else).

As to pouring money into the property for repairs prior to closing - highly risky for the buyer(s). As mentioned earlier, a better solution would be an FHA 203k program if FHA criteria is needed. It's a rehab program. There is a streamline version if you are borrowing less than $35k for the rehab portion. A good LO will be able to give you the accurate details. There are conventional rehab programs too if FHA isn't needed.

The reason its risky to put funds in before closing for the buyer/borrower is that the closing could never happen and the buyer/borrower loses those funds invested in the collateral prior to closing (usually). Especially if the seller is broke and is elderly and has nothing in the estate so nothing to chase for reimbursement. One of the reasons it might not close is prior liens as mentioned in a previous post. The way to determine this is to have your agent get in touch with a title company/attorney and have them do a pencil search of the property. With the seller being in a facility it is very likely the facility has a lien on the property that exceeds the value of the property. It's possible that the seller can't sell it without going through the short sale process. We don't have enough information to give you any answers. Be cautious. Do your due diligence. Sounds like the property may be too good to be true.

 

[Mark K]

Missing shingles, needs chimney flashed to stop leaks, damaged plywood roofing, and termite tunnels.

Hopefully there's not a lot of hidden termite damage. If you're going into this with the knowledge that there may be significant repairs required and you have the $$ to make the repairs, and the property is selling significantly below the sales prices of similar properties, go for it. I'd be surprised if it goes FHA but as others said, don't spend another penny until you know for sure.

You seem very anxious to get this property; be careful what you wish for.

BTW, never spend money doing repairs on someone else's house hoping to get it to the closing table.

 

[hlk1111]

Thanks everyone. So you dont feel it will be FHA approved? Even if i do repairs after FHA appraisor come? I am a little anxious i guess. Other properties that are in the same shape are going from 45-50k.
With my credit and work history i propably wont qualify for conventional with a low enough down payment.
I reallywant this propert because of the price and that i can livethere for a year or 2.. Pay it off quickly and update it so i can rent it out or resale and hopefully work on another property to do the same thing. Im sick of struggling and would like to have enough income to do some investing so my son doesnt grow up poor like i did. I want him to learn how to save and invest because i was never taught that mindset. Everyone i know lives paycheck to paycheck and struggles. Its sad. Off topic so i will cutit off here so yes.. A lil anxious and now nervous as well

 

[J Grant]

Thanks everyone. So you dont feel it will be FHA approved? Even if i do repairs after FHA appraisor come? I am a little anxious i guess. Other properties that are in the same shape are going from 45-50k.
With my credit and work history i propably wont qualify for conventional with a low enough down payment.
I reallywant this propert because of the price and that i can livethere for a year or 2.. Pay it off quickly and update it so i can rent it out or resale and hopefully work on another property to do the same thing. Im sick of struggling and would like to have enough income to do some investing so my son doesnt grow up poor like i did. I want him to learn how to save and invest because i was never taught that mindset. Everyone i know lives paycheck to paycheck and struggles. Its sad. Off topic so i will cutit off here so yes.. A lil anxious and now nervous as well

If you want to take the risk and pay for repairs if appraiser makes subject to X repair it would close...but protect yourself in contract if that happens. Also what would those repairs cost- if price is 25k and you spend 5k for repair it is 30k not that great a deal compared to one selling for 45k...great insight into getting a rental property and getting income I wish I had done that, will try to in future...best of luck.

If this falls through look into the 203k FHA loan program perhaps lender can switch it to that program and get it appraised subject to repair ask your lender.

 

[hlk1111]

Actually i already have an estimate for $4.1k and termite treatment would be about $600. I wouldnt replace the roof at this moment unless required. A guy I used to help outsaid hed flash chimney- replace 2 shingles and put a vent for $100! So 700 total maybe it would pass? I signed an as is agreement due to horrible advice from my realtor. Plus the profit from this is going right to the state and she needs to close by june 15th. So if this falls thru i will def lose the property

 

[J Grant]

if you lose it move on to another one - if a decent condition duplex sells for 45k this is not the deal of the century if it turns out needs so much work