Home Buying in 77077>Question Details

Sudhir, Home Buyer in 77077

I am closing in another week, I had asked for 4% in closing costs but the lender said the maximum allowed is

Asked by Sudhir, 77077 Wed Aug 12, 2009

3%, the buyer agreed to reduce the price by 1% but my lender is saying to do that the property needs to re-appraised and will cause delays with closing and also the interest rates will go up (since my lock in period expires), is this really true the property needs to reappraised because of a price reduction?

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The title policy is customarily a seller expense and there is a checkbox is the contract to make it so. There is also a checkbox to make the survey supplied by the seller at seller's expense. So, an amendment to change those 2 items could be done without increasing what the lender considers as seller's concessions.

Title policy on a $150k house is $1,110. The survey could be $400 or so. Ask them to write an amendment to change the 2 checked items and then if there is still a difference, remove the excess from 12A1(c) or just relinquish the remaining of the 1%. Provided that the lender is aware prior to drawing docs, the amendment can be signed at closing, but you still have time to fax the amendment to both sides and get it in to the lender and title today.
1 vote Thank Flag Link Fri Aug 14, 2009
While the appraised value should not be changed by a reduction in the sale price, the LTV (loan-to-value) ratio may change, and this could be the source of the problem. It is absolutely correct that a change in sale price must go through underwriting again, however. The underwriter normally would just sign off on the reduced sale price, unless there is a problem with ratios.

To illustrate what could be going on (since we don't have enough information about your situation and the effect on the figures in the GFE), if the price were $100k and the loan $96.5k, then a change of $1k would alter the LTV to 97.5%, which is out of range for FHA. On the other hand if the loan were conventional and the appraised value equaled $80k, then no mortgage insurance would be necessary, unless the $1k reduction raised the LTV to 80.8% (which does require MI). So, the 1% change could completely alter the viability of the file, either knocking it out of FHA or requiring MI when none was required before.

All these comments that there is something not right may be all wet.

The appraiser should be told the sale price, although this practice is viewed as suspect since the appraiser might try to give a value equal or higher than the sale price. Is it essential that the appraiser know the sale price? No. Must the underwriter request a review of the appraisal? No, it is within her purview to consider risk to the investor without further consideration of the appraised value, once she has that value.

The time frames given for underwriter review and drawing of documents seems excessive. Normally, a lender can re-draw documents the same day (although they often charge for re-draws), and an underwriter can review a price change within an hour, provided they are not already clogged up with other files, such as at the end of the month.
The account executive or processor for the underwriter can provide guidance on the time it takes to review and re-draw. Your estimate of up to 3 days and within 48 hours are close to this, but your loan officer should be able to do better, since we're in the middle of the month. The 7 to 8 working days for everything is absurd, since the appraiser review appears unnecessary.

It may be that the loan officer does not want to be made to pay for the re-draw fee and is putting up fake obstacles to convince you to go with it as-is. Your lock can be extended by almost every lender simply by paying an extension fee, which is normally a lot lower than 1% of the sale price.

As Mary Ann said, new rules are in place and constantly changing for the mortgage industry because of the massive number of foreclosures. Okay, Texas didn't have the huge increase experienced n California, Nevada and Florida, nor was it close to the percentages in other areas, but we did see an increase in problem loans. Now, everyone is being extra careful and trying to follow complicated new rules that keep being re-written and tightened. Unfortunately, the fallout from the mortgage holocaust also fell on us and we have to follow the same rules that come from the national secondary market (FNMA, FHLMC, FHA, etc).

Try talking to the loan officer and ask for an extension of the lock if needed and tell him you'll pay the couple of hundred dollars to save the 1%. You can ask him if the underwriter is really requiring the appraisal be updated or he just thinks it will have to be. But the underwriter will have to review the price change and (if documents were already drawn) documents re-drawn.
Web Reference: http://www.Mortgages-TX.com
1 vote Thank Flag Link Thu Aug 13, 2009
yes, any time the #'s change from the original contract or "good faith " estimate, it has to be re-submitted to underwriting and reviewed again. (this is not because of the appraisal)... There are brand new rules and regulations in place lenders now have to follow(that came about during all the 1,000's of foreclosures). They always want to make sure #'s have not been modified for the wrong reasons..
1 vote Thank Flag Link Thu Aug 13, 2009
I wouldn't think that a resuction in the purchase price would require another aprrraisal. However, it will require the file to be resubmitted to underwriting for review.
0 votes Thank Flag Link Wed Mar 20, 2013
I would check with the lender again. It seems that if the appraisal met or surpassed the sales price, there shouldn't be a need for an additional appraisal since you are essentially lowering the sales price - not increasing it.
I would check with other lenders in your area and see what they say.
0 votes Thank Flag Link Tue Jan 25, 2011
my educated guess would be no...if it appraised for the previous amount....it shouldnt be a problem to be appraised for a lower amount....unless its been a really long time between excuted contract and closing. This should have been taken care of by your Realtor before there was an executed contract I woud think
Web Reference: http://www.camerohomes.com
0 votes Thank Flag Link Sun Aug 16, 2009
Sudhir,
I don't understand - if they are willing to pay another $1,500 - what difference does it make where the $1,500 comes from for them. Have the two agents present it that way.
Margaret
0 votes Thank Flag Link Fri Aug 14, 2009
Thanks again...

It's 1500 dollars. Seller is not willing to pay for the Title Policy and Survey...I have asked my real estate agent to see if they can pay for the insurance or other fees as you suggested.
0 votes Thank Flag Link Fri Aug 14, 2009
Sudhir,

Sometimes there are cost on your closing statement that can be moved over to the sellers side or split between you and the seller.
How much does the 1% add up to, see what is on your side that the seller can pay.
Did you get a survey, An Insurance Policy, The fees to the Title Company Attorney, Other title company fees.
Just move some over. No one has ever said that a seller can not offer some other perks.

Margaret
0 votes Thank Flag Link Fri Aug 14, 2009
Thank you very much for the answers... We are getting it closed on 8/17 so not a lot of room to get an amendment to the contract from this point forward.
0 votes Thank Flag Link Thu Aug 13, 2009
Sounds like a broker.
We make thos kinds of changes all of the time.... appraiser can usually ammend appraisal and undwerwriter can sign off on changes within 24 hours.
0 votes Thank Flag Link Thu Aug 13, 2009
It might be that he's being lazy; another lender would be the best source on that. I do know that these new HVCC rules will start causing delays if the loan changes at all. Either way, you should try to get your 1% ... Good luck!
0 votes Thank Flag Link Thu Aug 13, 2009
My mortgage broker's statements are below...on (8/10)

As I have explained over phone, changing sales price can delay the closing by about 7-8 working days, so this is not an option at this late in the mortgage process.

Change of sale price must reflect on the appraisal report, which can take up to 3 to 4 working days after we receive executed contract with the new sale price. Then the new appraisal has to be cleared by underwriting, which can take up to 3 days. Docs will be drawn 48 hours after this.
0 votes Thank Flag Link Thu Aug 13, 2009
Thank You very much for each of your answers, it proves my mortgage broker is incompetent....

I have my closing scheduled tommorow, so going to loose 1% ....
0 votes Thank Flag Link Thu Aug 13, 2009
Your lender just doesn't want to do it ... Ask him or her to redo it for you ...
0 votes Thank Flag Link Thu Aug 13, 2009
I think your lender is just lazy and doesn't want to redo the documents with the new price. As you see from all the answers, especially from Tom who is a mortgage broker. You would normally need a new appraisal if the price was increasing not decreasing.

Naima
214-289-8555
Naima@Sumner-Realty.com
Web Reference: http://www.SumnerRealty.com
0 votes Thank Flag Link Wed Aug 12, 2009
If the house has already appraised out, and now the price is being lowered, why would it have to be redone? The only time I've ever heard of another appraisal to be done is when the house doesn't appraise out. In this case the lender was ok with the appraisal at the higher price. Lowering the price of the house shouldn't affect it. Check again with your lender.
0 votes Thank Flag Link Wed Aug 12, 2009
Unfortunately, new rules have come into play since July 31 that are going to start causing a lot of delays. When did you put the house under contract?
0 votes Thank Flag Link Wed Aug 12, 2009
Why another appraisal? Value of home does not change during course of few weeks? 1st I have heard of this.

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Lynn911
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0 votes Thank Flag Link Wed Aug 12, 2009
Sudhir,

I don't believe the property has to be re-appraised, and delayed. It is just a simple change in the price, which happens quite often.

Good Luck!
Web Reference: http://www.abemills.com
0 votes Thank Flag Link Wed Aug 12, 2009
No. Never heard of such.
I have had many loans change midstream. Many times it is over repairs and things that the seller doesn't want to do so there is a price concession.
0 votes Thank Flag Link Wed Aug 12, 2009
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