Home Buying in Bethlehem>Question Details

Fredspeece, Home Buyer in 18330

buying FHA home in PA. Lender is making me do repairs before I can buy it and there is no garentee from them that I will get the house, is that legal?

Asked by Fredspeece, 18330 Tue Aug 30, 2011

They are telling me that these are FHA guidelines and rules from the appriasers and underwritters at the loan company and no one(seller, Fannie Mae, nor Lender wells fargo) is garenteeing me that I will get the loan or the house. Just needs minor repairs that I was planning to do myself, not have an expensive contractor do. Doesn't seem right to do repairs on a home I dont own and only getting weak assurances that the house will be sold to me. My realitor is telling me everything will be fine but it just seems like all the costs and fees (extra inspections and re-apprasils) just keep adding up. Is this just something that happens with FHA sold as-is houses?

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FHA requires that the house should be habitable so it is expected that repairs should be done first before you get approved.

You have the option to switch to FHA 203k rehab loan to have the repair cost be included in your mortgage. For more details about 203k loan, visit http://www.cfs203k.com.





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Dana Lindberg
CFS Mortgage - http://www.cfs203k.com
0 votes Thank Flag Link Sun Sep 29, 2013
FHA loans to have " repair requirements" that need to be done before the loan is approved. First place to start is to have owner fix them because they own the house. If they are unable/or unwilling then either the buyer does them (yes there is risk is you do not buy the house) or'

you switch the loan type to conventional with 5% down. I know FHA is 3.5% down but it my avoid some of repair requirements of a FHA repair. Then you can do them after you own the property. Talk to your mortgage provider to discuss the differences between FHA and Conventional. In the long run conventional in most cases the better choice.

Scott Tomlinson
610-392-1402
0 votes Thank Flag Link Sat Sep 14, 2013
As an agent it sounds like he/she is going out on a limb saying everything willb e fine, since this is completely out of their hands.

How does your contract stipulate what will happen if FHA requires repairs. Usually the FHA addendum states that if the lender requires repairs to be made as a requirement of the loan then you submit that list to the seller. The seller than has x amount of days to respond to that notice whether they will or will not make the necessary repairs. If the seller does not agree to make the repairs than YOU CAN ELECT to make the repairs yourself before settlement, or if you decline, both parties can agree to void the contract.

It is very risky to make any repairs on the house when you do not own it! FOR STARTERS, what if while you are in there making repairs another problem is found, or your contractors create another error. Where does the liability lie?

I do not think I personally would go into someone else's house to make repairs, there are too many liabilities that could put you in jeopardy.
However, i do not know what the repairs are, so it could not be that big of deal!

Good luck,
0 votes Thank Flag Link Thu Sep 1, 2011
Hi Fredspeece,

Since this is a Fannie Mae owned home it should be eligible for a HomePath mortgage which doesn't require an appraisal and thus doesn't require the repairs to be completed prior to closing/funding.

In your contract where it states "as is" the owner is telling you that they are not typically willing to do any repairs at all so take that for what it's worth.

The safest bet could be switching from FHA to HomePath so you're not paying for a bunch of repairs without a hard commitment that you'll get the loan and the home.
0 votes Thank Flag Link Thu Sep 1, 2011
Hi Fredspeece, I think the best solution here is to have your agent contact the seller and see if you can get these repairs done by him or her, or figure out some sort of a credit system where the seller completes the work (since he or she is the true owner of the house) and that way you don't have any liability for doing the work on a home that is not technically yours. Win-win. Best of luck, Caroline
0 votes Thank Flag Link Wed Aug 31, 2011
Thank you all very much for your detailed responses.

I'm required to do a structural inspection (at 90$/hr  ) once to figure out where the very minor leak is coming into the basement and then a re-inspection report saying that it was fixed. Also will need a contractor to repair the external paint on 1/8th of the front of the house because it is pealing (rest is aluminum sided), plus will need a roof inspection saving that the roof has another 2 years of life to it at least. Then need to repay the lender's appraiser again to finish appraising the place (495$ first time then another 90$ to look at it again.). The lender doesn’t care how the repairs are done, and says they must be done before they will finish the appraisal process, but the seller/Fannie Mae is requiring a licensed contractor to perform the work. My dad has been in construction for 30+ years and we were hoping to do the work ourselves after I actually own the place.
0 votes Thank Flag Link Wed Aug 31, 2011
The home must meet the minimum FHA guidelines in order for the lender to issue the mortgage so its not really a matter of being legal or not, although I completely understand how you asked the question. The lender is under no obligation to give you a mortgage. The condition of the home is part of the terms under which the lender will give you the mortgage so just like they don't have to give you the mortgage, you don't have to make the repairs or take the the mortgage. Typically the seller should be asked to make the lender required repairs, even if its a foreclosure because they'll have to make the same repairs for any buyer. If they don't, they'll probably have to drop the price and will lose more in price reductions than they would if they just did the repairs. If you really want the house and the only way to get it is to make the repairs before you own the house, that's just a decision you'll have to make when you weigh the benefits, risks and costs of making the repairs before closing. I typically recommend no more than about $500 in lender required repairs. If it takes more than that, the house will probably be unlendable for any loan other than an FHA 203k home renovation loan - and if that's the case, you should be getting a healthy discount on the sales price. I know its frustrating, especially when they are simple repairs like a cracked window or some wood trim rot. Good luck.
0 votes Thank Flag Link Tue Aug 30, 2011
I can understand your frustration. Is it legal? Good question. It is however, done all the time. So I am sure that FHA does not care who does the repairs, just as long as they are done properly and then verified by the appraiser. It's easy to understand why doing repairs on someone else's home sounds precarious but the fact is, there are so many homes out there that need repairs and there are so many buyers that can only use FHA financing for one reason or another. Therefore it is a risk that some buyers are willing to take. I have one under contract right now that the buyers actually wrote in to the offer that they would do any FHA repairs. Good thing they did because it is a distress situation and my sellers cannot do any repairs. Hope this helps a bit. The only assurance I have is that this typically works out if you had a solid pre-approval.
0 votes Thank Flag Link Tue Aug 30, 2011
The Federal Housing Administration (FHA) is concerned with safety. This means that items such as normal “wear and tear” aren’t emphasized as much as what FHA considers hazardous. Did you have contingencies in your contract or was it strictly “as is”? If you had contingencies and there are items that you’ve requested the seller to fix, it may be in your best interest to get a re-inspection to confirm that the repairs have been completed correctly. Reach out to the inspector and see if they can offer you a discount for coming back to reassess the specific areas. If you’re purchasing “as is” however, a second inspection shouldn’t be required. As far as your appraisal, your lender may be able to cut down or eliminate the fees for the second visit. Either way, it may seem like a pain now, but it’s much better to invest a small amount ahead of time rather than an excessive amount after you’ve already committed.

Good luck!
Web Reference: http://www.findmdhouses.com
0 votes Thank Flag Link Tue Aug 30, 2011
Hi Fredspeece,

I would NEVER advise my client to pay for and do repairs on a house they don't own. In today's market, anything can happen to make a deal fall apart and then you've spent your money on someone else's property. Now, if your Realtor is so sure everything will be fine, have them pay for the repairs and you can pay them back once Title has transferred to your name. Or, better yet, ask the seller to pay for them - letting them know even though it's an 'as is', you can't get financing unless the repairs are complete before closing/funding and you're not going to pay for them. If neither of these ideas work, cancel contract and find a home better for your situation.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Tue Aug 30, 2011
Did you have a Buyer agent? Did they not explain the FHA process? FHA can be a great product.. but you can run into the issues above on roofs, old fuses, chipping paint and the like.. stuff that FHA really, really doesn't like. Your best bet is to do the repairs after your mortgage commit. That way at least you know if you do the repairs it won't be on a house you won't buy. OR tell the seller you're withdrawing due to financing denial ( their listing agent should have warned them as well ) and see if they will step up and do them rather than lose the buyer.
0 votes Thank Flag Link Tue Aug 30, 2011
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