Can anything be done to close on a home appraised with a 'C5' ranking?

Asked by S_k_morgan, Harrison Township, MI Fri Feb 15, 2013

Fannie Mae accepted our offer on a foreclosed home - "As is" condition. We had an inspection done which there were some minor repairs (carpet, paint, some small holes in drywall, some electrical) and some major repairs (roof had fewer than 2 years, siding was rotting in some spots, basement tie-rod holes need to be plugged) that need to be done. Even with that, we wanted to proceed with the offer. An appraisal was then done and my mortgage lady came back and told me that we could not get a loan because it was appraised at 'C5' condition. We are now $300 in on the inspection and $400 in on the appraisal and basically they are saying "Sorry - no mortgage"???? A renovation mortgage is out of the question because they want 25% down. Is there anything that can be done to salvage the deal or should we just give up?

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Shane Milne’s answer
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Sat Feb 16, 2013
Are you buying this as a primary residence? If so, then an FHA 203(k) loan is another type of rehab loan and the down payment requirement can be as little as just 3.5% of the purchase price + cost of rehab.

You can read at (page 2) (page 3) that a property condition of C5 isn't deliverable to Fannie Mae (nor Freddie Mac) until the repairs are completed, "deliverable" means the lender doing the loan won't be able to sell the loan to Fannie Mae or Freddie Mac until those repairs are done. There are other types of conventional loans that aren't sold to Fannie Mae or Freddie Mac, but not many, and I'd suspect they'd also require the items you listed to be repaired as well.

However the FHA 203(k) rehab loan can finance the purchase price + cost of repairs, so you can purchase the home and then make the repairs afterwards.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
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