Unfortunately, the guideline most underwriters use is "current rent or market rent - whichever is lower". The market rents will not really matter because there are actual rents from the property, and the underwriter cannot discount them. This is what the building will actually continue to generate - at least until the current leases are up. This is where their mortgage payment is going to come from until those leases expire. Petitioning the appraisal will not work. This guideline is pretty much set in stone, unfortunately, and it actually does make underwriting sense.
You should probably be having your Lender look at other areas in your file. If you are only $103.00 off, try the following:
- Find out if you could get an ARM with a lower rate, and that will translate to a lower payment.
- Shop your insurance to make sure you are getting the best rate for your coverage.
- Also, ask for the maximum deductible your Lender will allow on your insurance, and see how much that lowers your rate.
- If your car is not with the same company, request a quote with your car transferred to them. This will give you a multi-line discount.
- Make sure the monthly payments being calculated on your credit cards are the minimum payments as shown on the most recent credit card bills sent to you. I have had situations where the Borrower's credit report shows a much higher payment than the minimum due. If you sent a copy of the most recent payment, your LO should be able to have that figure used for the payment due on the bill.
Fight for your loan, Daniel. Make sure your LO is fighting with you too. If you sense a lack of knowledge or interest on their part, have your Attorney go back to the Seller, explain the situation, get the contract extended, and find another Loan Officer who will fight with you. Most Sellers would be willing to work with you in this case, because it is a property issue, and not really you as the Borrower. I have typically been able to get extensions in such cases, simply by writing a strong letter of explanation, as the LO, to the Sellers, through the Buyer's Attorney, so it is not impossible.
I hope it all works out well for you. Please do not hesitate to contact me should you have further questions.
Nike Fasanya, CMC
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Quick and easy one:
Flip the loan to a lower interest rate or an FHA ARM with lower rate, or buydown the rate, to make the PITI work. Thats a simple fix and it will be done.
Dispute with the appraiser and get them to list real market rents, there are 2 sections on there 1 for current rent and 1 for market, the UW should be able to go off market rents, talk to the UW, the loan officer will need to know what they are talking about.
The appraiser really doesnt care about the rental section and usually will correct it if you explain to them its harming the loan.
Contact me if you need more help, I have saved many of these exact ones.
Not that we don't enjoy answering your questions on this forum. : )
My advice to you is to contact one of the professional and dedicated (obvious from all of the pro-bono time we spend answering Trulia questions) real estate agents on this forum so that you can develop a trusted and interpersonal relationship. It will save you hours of time, stress and aggravation on this purchase and/or the next.
Consider that most of us have already experienced a lifetime of real estate challenges and can make assessments on obstacles in an efficient and educated manner.
Unfortunately the building im using doesn't meet this criteria.The problem is they're using the current rents which are way under what the market rates are.
The previous owner purchased the property at a judicial sale in January and rushed to put in tenants in the middle of the winter, but since then did significant work on the building. And i believe the rents are seriously under the market. However in the FHA appraisal they just said their opinion on the market rate for rents is current rents, which Is incredibly in accurate.
Can i petition the appraisal on the rental values? Any help here would be appreciated.
Hi there, Daniel! Sounds like an interesting situation. Best bet for you is to pose this question to your real estate agent and/or mortgage lender who is handling the FHA loan application and managing the whole process. As an expert, your agent or your lender will be best able to explain your options accurately and completely to you.
Another option is to contact a HUD-approved housing counselor to advise you regarding your situation. Please see the below link for more information.
Good luck to you!
You are stuck. They will not change the rents at this point.
Have you thought of getting a co-borrower to bring up the income and bring down your ratios to an acceptable level?
This is the solution I would work on!
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Licensed in Maryland, Virginia and Washington, D.C.
Assisting Homebuyer's and Seller's for 28 years
Im literally 103 off the PITI, which is really frustrating, a seperate issue is the garage was being leased seperate from the units for 150 a month. This lease also expired in oct 1. Is there a way in qualifying for FHA that in addition to the rental value of the units i can add in the rental value of the 2 car garage or challenge the market estimate for the 1 bdrm. I dont think the previous rental amount is at all an accurate indicator of the rental value with all the work that was done on the building. Please help i have to close on this loan within 10 days!
Have you ever heard the expression, "It is what it is"? Unfortunately, in your case, what the current owner did was to destroy any chance you have of securing FHA financing. Since there are current tenants, you must use what they're paying. Oddly enough, if the units were empty, you'd be able to use current market value.
The only ray of sunshine I could offer you is to make sure that your loan officer is doing the math right, and that he's counting ALL the units, even the one you're planning on occupying. Also, if your FHA Case number was ordered before October 4th, make sure they're using the correct calculation for the FHA MI (It went from .55 to .90 on Oct 4th) In any case, you could make the argument that the owner-occupied unit should be counted at current market rate, even if you're forced to use the current cheap rents on the other unit.
Bottom line, it's going to be tough to get this overturned, because the FHA Case number and Appraisal would travel with the loan, even if you took it somewhere else.
And an underwriter HATES to be told that they're wrong, (ESPECIALLY when they ARE wrong) But in this case they're not. The rent is cheaper.
It is what it is.
Let me know if you want me to help someone with their math.
Mecum Group - Wintrust Mortgage
Are you buying this building to live in or is it strictly for investment and how many units are there in total?
Regardless you should be looking at buildings that you think will support the mortgage you will be paying out each month. If it doesnt then it is not a good building to buy.
Have you thought about going back to the seller at telling them that you need to adjust your offer based on the FHA appraisal of market rents. This seems to be the better alternative.