Financing in Redlands>Question Details

Chris, Home Buyer in Redlands, CA

What happens when Homepath financing has to be switched to FHA?

Asked by Chris, Redlands, CA Wed Dec 29, 2010

I made an offer on home and agreed to finance using the HomePath program - my offer was accepted. As the loan process continued, it was discovered that I wasn't able to get the automated credit approval that my lender had anticipated. However, FHA financing was not a problem, and offered a better payment. I thought all was good, but the asset manager has indicated that I need to sign an addedum indicating that I guarantee to pay the difference if the appraisal comes in low. In addition, the asset manager wants to see addition funds in my bank account to cover such a cost.

I have to be honest, this seems completely unethical, and borderline illegal. Is is Fannie Mae's intention to sell homes for more that they're worth? Not having to get an appraisal is great, but is it being abused to overprice and sell homes?

Is there anything I can rightfully do here?

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Answers

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Chris, this is an interesting scenario and there is nothing illegal or unethical about it...but that still doesn't make it right.

In addition to having to come up with the 3.5% down payment, and possibly the closing costs (did the asset manager address seller paid closing costs?), the property will now be subject to an appraisal.

You lender will not loan you more than the home is worth - ie. the appraised value - as an appraisal is not required with HomePath, you are pretty close to hitting the nail on the head - Fannie can sell for whatever price they want because there is no support of the sales price with an appraisal, you do not need to come up with a down payment, and they will cover your closing costs.

So, to answer your question - it's not unethical or illegal, but yes - it's B.S.

Your option? If you have a strong Agent, fight for the sales price to match the appraised value. Your recourse - you should be able to back out of the deal and get your good faith deposit back.

One other thing you should be aware of - if you are using the same lender for the FHA loan as you were using for the HomePath loan - be acutely aware of the rate.

HomePath loans have much higher than market rates because again,with no appraisal and they cover the closing costs means they can sell the home for more than it's market value and the buyer asks fewer questions.

Make sure that the lender is not offering you a higher than market rate because, when compared to the HP rate, it's lower.

I know that's a lot to think about - I hope this helps.
2 votes Thank Flag Link Wed Dec 29, 2010
Good answer Scott! You delved into quite a few of the ibises when it comes to HomePath loans. One question for you regarding HomePath loans in your neck of the woods...you are saying that Chris doesn't need to come up with a down payment, does HomePath allow $0 down where you are (as a 100% LTV) , or is this combined with a grant or bond program loan?

Chris, the asset mgr wants to sell the property. He is pushing to keep the value on his books in case your appraisal comes in lower than the selling price. You state, "the asset manager has indicated that I need to sign an addendum indicating that I guarantee to pay the difference if the appraisal comes in low." Key words here are "indicated that I need" - I'm glad you see this. You can choose to move forward with your purchase without signing this portion of the addendum - strike it out if you want. See if the asset manager will blink & play ball by what is generally understood as the rules of the real estate buying, I hate to call it...game.

Another interesting twist here with an FHA loan is a disclosure regarding the FHA Amendatory Clause which states that, "...the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits...setting forth the appraised value of the property of not less than $XXX,000." (You can read the FHA Amendatory Clause here: http://www.trulia.com/blog/edit/194603/ )

I am not an attorney, & I not saying that this gives you a "Get Out of Jail Free" card, but you might want to look at this an another arrow in your quiver, if you should decide that you will not agree to pay the difference if the appraisal comes in low.

Wishing you all the best on your home purchase,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund FHA, 203k, VA, USDA, Jumbo, Conventional, loans to Canadians & other Foreign Nationals, on time. NMLS ID 263779 | AZ BK 0903725
1 vote Thank Flag Link Wed Dec 29, 2010
Chris, Just recalled another possible program if you are within the occupational groups such as
MD's, Dentist’s, CPA’s, or Attorney’s.
BBVA can certainly obtain a 100% loan, NO MI, No prepay penalty, very low rate and the credit score required is 650 min.

The agents in my various Real Estate Offices have had recent success with the same Senior Mortgage Officer / Tom R. Callahan / tom.callahan@bbvacompass.com

My sources report that the bank is still offering this special Professional type loan program and has NO intention of suspending it.
It is apparently great for building bank business accounts.

Good luck to you and Happy New Year !

TJ
0 votes Thank Flag Link Fri Dec 31, 2010
Chris, If you are a "FIRST-TIME HOMEBUYER". My staff has reported great testimonies in regard to the below new program.

Notice to first time home Buyers, and Realtors serving the following states: Florida, Alabama, Texas, California, Arizona, New Mexico, and Colorado. BBVA-Compass has a new program available in these states.
DO NOT GO FHA !
Here are the highlights of this unmatched program that my agents have had success with closing deals and saving our clients a lot of money.
1. NO Mortgage Insurance in payment or rate
2. 5% down (declining market is not applicable !!)
3. 30 year fixed rate (4.875% estimated)
4. NO payment until the 6th month after closing. (Bank is taking the hit, and I confirmed this with a recent closing escrow doc)
5. NO origination fee, NO points, and NO junk fees at all !!!
6. single family home or townhome eligible
7. 680 credit score
** FHA , FNMA nor HPath can not touch this program. It is truly remarkable, and is certainly a way this bank (BBVA-Compass) has demonstrated giving back to the communities it serves !

The Sr. Mortgage Banker that my staff in these area's is using is Tom R. Callahan and you may reach him at (904) 591-6722 or better email tom.callahan@bbvacompass.com

Take full advantage of this program and save money on not having the new FHA 1.00 MIP + .90% / monthly to pay which is totally ridiculous!! Yes, FHA is nearly doubling the monthly amount.

Good luck selling and shopping for the right home. TJ, PhD / Attorney
0 votes Thank Flag Link Fri Dec 31, 2010
Good catch Ros, my mistake - HomePath does require 3% down. My apologies for the misinformation and great point about the "game". Hopefully Chris has a rock star agent that's not afraid of a little hardball
0 votes Thank Flag Link Wed Dec 29, 2010
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