Financing in 18337>Question Details

Carot, Home Owner in Milford, PA

I should move forward in building a house w/ an FHA loan (pre-fee increase) or loose some or all of $10k I gave to builder so far?

Asked by Carot, Milford, PA Sat Apr 7, 2012

I'm building a 2,200 s/f house (lakefront lot). Cost of construction price is $384K and I paid $180K for the lot but only owe $115,000.00 on the lot. I have $100,000.00 of my own money to add to project.

The FHA loan appraisal is $550,000.00 and at same time I did an appraisal of my own and 2 other appraisals as I also tried doing conventional construction-to-permant, thus 3 appraisals. The 3 appraisals came back $180K lower (the average) than FHA appraisal! I can see a 40k/60 k diff but not 180k. FYI - the land portion of 4 appraisals were much more consistant..

concerned w/ paying PMI ins on FHA loan if I try to refinance after construction to remove PMI and not being able to do it conventionally because of the other 3 lower appraisals, thus being upsidedown?

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Suzanne MacDowell’s answer
It sounds as though the project will cost $560k and the FHA appraisal came in at $550K and you are concerned that the other appraisals are more accurate, and lower, by a significant amount. THAT sounds fishy. You need to look closely at all the appraisals. Make sure the comparable sales were all lakefront property, and if not, that an appropriate increase in value was added. Make sure they got the style of home correct, and that the square footage is comparable. Make sure the comps were new construction or that an appropriate increase in value was added to account for that as well. Make sure the comparable sales had upgrades comparable to yours or that an appropriate increase in value was added. All these factors weigh on a home's value

I had this happen last year to a lakefront owner for a refinance, the appraiser was from out of the area and used comps that either were not lake front at all or were on a small tributary, not on the main lake, and thus his opinion of value was so far off it was ridiculous. In fact, my clients actually reported him to the State Attorney General's office for over all incompetence. An appraisal is an opinion of value. That's all. Values go up and down and change based on a lot of factors, but I will tell you this, lake front property tends to hold its value better than most other property so make absolutely sure EVERYONE used comparable sales of LAKEFRONT property only and on the correct lake!
1 vote Thank Flag Link Sat Apr 7, 2012
If you get an FHA mortgage commitment , I would recommend closing on it & building right away , before the construction costs increase even more with the current higher gas prices .
0 votes Thank Flag Link Sat Apr 7, 2012
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