the home i want to but is a fannie mae, the mls report say they only accept cash / rehab loans. i have a conventional loan. where do i go from here?

Asked by Vonduper, Minneapolis, MN Tue Mar 5, 2013

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Gregorio Den…, , San Diego, CA
Tue Mar 5, 2013
Chris Block says:
"FHA 203k's are pretty much a waste of time for many reasons, but mainly because they take forever to close."
What absolutely TERRIBLE advice and it's a shame you care more about getting paid faster than what is beneficial to the client. The 203K program is of great value to those that want to buy a fixer and custom design their dream home. The 203K program is of great benefit in revitalizing areas devastated by tornadoes, hurricanes and other natural disasters. So many people have utilized the 203k to save money on purchase price and finance their improvements. It's outrageous that you would say it's a "waste of time, because they take a bit longer to close.
1 vote
Josh Lund, , Minneapolis, MN
Thu Jul 16, 2015
Hello Vonduper,
Good Morning.
This seams to maybe be a little off. Maybe another loan options Conv 30 or FHA 30 would be of help to you. We can also look at rehab loans too. Are you still in the market to buy a home? If so, I would love to see if we can help you out. Do you have a realtor yet? If not we have preferred ones we can get you in contact with. I would like to see if I can help you out with a home mortgage. I will try and make this a very easy process. Please let me know how to help out.
Thanks much.
Josh Lund
MN District Branch Manager
NMLS # 387408
Gold Star Financial Group
Mobile: 612.802.3265
Office: 952.884.5442
eFax: 877.666.0007
0 votes
Diana, Home Buyer, Hay Springs, NE
Wed May 20, 2015
If anyone is reading this after all this time and is trying to do a Fannie Mae loan....

First, Fannie Mae is warmer to cash or conventional loan purchases. Many repo homes have a large amount of damage and will not pass the required inspections. Thus, sales have a greater chance of failing if they are other types of financing. If you can do it, try to stick with cash or a conventional loan. If not, be aware of any inspection requirements for the type of loan you are seeking and know that a cash or conventional purchase offer is likely to be accepted over yours.

We recently completed a purchase such as this. We did conventional loan (not without hurdles to navigate) with 20% down. Try a smaller local lender that is more familiar with the area and the situation. Work with more than one lender and ask lots of questions. Have as much info ready for them in advance as you can. Don't try to do this without an agent. In fact, if you can find an agent that is experienced in this type of sale, they can be a great help. Not all agents have the skill, experience, nor taste for this sort of thing.

The property was/is in need of repairs that would have made it impractical to try to get an FHA loan or any that required that type of inspection. The bigger hurdle we encountered was getting insurance since the siding was falling off of the house. We were Johnny on the spot with returning requested information and did not rely on anyone or wait for anyone to guide us. We were able to close in under 5 weeks of the purchase offer being made. We were actually able to close the week earlier except for someone being unavailable because of a holiday of some sort. So it can be done quickly if the buyer stays organized and stays on top of the loan process. Be aware of the insurance hurdle though. That was almost more frustrating than the home loan as the agents seem not to know how to deal with this scenario. It was a simple temporary exclusion to the policy. Fannie Mae does not allow any work or repairs to be done prior to closing-apparently no exceptions.

--- Don't be discouraged and be open to being flexible. We moved in and painted from the ceiling down including removing the trim and painting it and ripped up 2000 sq feet of carpet and tacks and self installed hard wood floors in less than a month and were told it would take us 3 or 4 months to do those things. There are plenty of people ready to say "that is not possible " or " do not bother". We got a 3600 sq ft house that was originally $210,000 for $95,000 ( that was built in 2006) and think it was absolutely worth the effort. Good luck!!
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Jeff Byrd, Agent, St Paul, MN
Thu Mar 21, 2013

The FHA 203(k) Streamlined Mortgage is an excelent product when done by the right loan officer. I have yet to have heard of one done by my loan officer take over 35 days to close from the date of the PA. I have suggested him to many agents that have had the same experience. The key to these loans is first using an experienced FHA 203(k) loan officer, second use one contractor and get your bids prior to making the offer so you know what you are getting into. You need to know your final cost and decide if it is worth that much when the work is done. In many cases you can end up with instant equity when the work is done. If you are working with an agent have them contact me and I will be happy to walk them through the process. I would not want to interfere with any agency contract that you might have and am happy to help out. If not contact me and I would be happy to help you out.

Best of luck to you.
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Susan Hoffla…, Agent, Shoreview, MN
Wed Mar 6, 2013
Hi, Vonduper!
The reason they say this is because they are anticipating that this property would not endure the scrutiny of the appraisal process and your lender would not approve the loan. They don't want to take that chance. And, that is the seller's/bank's prerogative.

As an agent, I have advocated on behalf of my clients by communicating with the listing agent to see if their bank/seller might be willing to accept a conventional mortgage if there's a considerable amount of money being put down or other circumstances. OR, I assist my buyers in determining if they want to explore getting a rehab mortgage and, perhaps, exercise their right to obtain other moneys that would assist in their financing the property.

Get your agent to ask some questions and explore the possibilities.

Good luck!
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MaryAlice Be…, Agent, Eagan, MN
Wed Mar 6, 2013
There are a couple of additional items to take into consideration in this scenario.

Does it make financial sense to purchase and fix up the home?
Rehab loans generally have higher fees, which makes the purchase more expensive. What will the cost of the repairs be? Is the home worth the purchase price plus the cost of repairs and the carrying costs you will incur while it is being renovated?
Will you be able to live in the home while it is being repaired? If not, will you have to pay two housing payments until you can move in? Does that work for your budget?

Sometimes the cost to purchase and fix up a home is more than the cost to purchase a home that is already in good condition. Be sure to do the math before you purchase.
0 votes
Fritz Von Ye…, Agent, Roseville, MN
Wed Mar 6, 2013
Hi Vonduper,

I specialize in working with new home buyers. If you want me to check this out for you please give me a call. Thanks.

Fritz Von Yeast
Better Homes and Gardens All Seasons Real Estate
0 votes
Chris Block, , Saint Paul, MN
Wed Mar 6, 2013
I stand corrected who is your loan officer Mark that can do this in under a month?
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David O'Neil, Agent, Minneapolis, MN
Wed Mar 6, 2013
Looks like a good a debate on Rehab loans. On thing to keep in mind, FHA is charging the rules on Mortgage Insurance. Starting in about a month, all FHA loans will be required to carry Mortgage Insurance for the entire life of the loan. If you can find a way to stay conventional, it might be worth it in the long run. Interview multiple lenders to find the best option. Good luck!
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Mark Claesse…, Agent, Coon Rapids, MN
Tue Mar 5, 2013
You have two options. One, you can check with your loan officer and ask the about doing a conventional rehab loan. They are wonderful and work great.

And number two, I am going to do something I never do on this forum and that is side with someone. Gregorio from CA is right. Chris Block stated that "FHA 203k's are pretty much a waste of time for many reasons, but mainly because they take forever to close." I 100% agree with Gregorio. In fact, and forgive me, Mr. Block, but I must speak the truth here. That is 100% false information as well as terrible advice. Over half of my buyers last summer used 203k streamlined FHA renovation loans. And you know what, Vonduper and Chris, I can tell you for a literal and verifiable FACT....that these take less time to complete and close than the standard 203b FHA loans. That is a FACT! My 203k loan officer can get these closed inside of 3-4 weeks and he has done it many times. My buyers with regular FHA loans never get anything closed under 4 weeks. So you need to know this right up front.

But the most important thing I can stress here is that if you are approved for the conventional loan, you will surely get approved for FHA. And just because you are going FHA does not mean you still can't put 20 or 30% down. Hey, most of the buyers out there that can be approved for conventional financing often go FHA just because it can be a better deal. But the bottom line is that there is a renovation loan for FHA and also conventional. And my 203k guy does both, all day long. If your loan officer cannot do that for you, then please go to my website link below and give me a call. I will be glad to give you his contact information.

I hope you check out all of your options here, because as opposed to what Chris said, these loans are NOT a waste of time and they don't take forever to close. You can and most likely will wind up with a better deal on the property and you should be able to hopefully buy it right AND have some instant equity in the home when you get done with the renovation.

0 votes
Chris Block, , Saint Paul, MN
Tue Mar 5, 2013
I think my comrades have some really good points so far. The truth is I would need to look at the actual property to see what you are trying to do here.

Are you an investor or just a regular buyer? Some REO listings are just looking for cash right now because the inventory is tight, but other listings it is because the condition is really poor and won't even qualify conventional. For example, I like Chase's style with using Hard Money and then refi out Conventional once repairs are done. Problem is if you are not an investor this won't fly. Hard Money also only lends to LLC's and they won't just give you money for the heck of it. There are guidelines and it is not that easy for "newbies.

FHA 203k's are pretty much a waste of time for many reasons, but mainly because they take forever to close. I think HUD properties still work pretty well for this loan though.

Bottom line? I could go all night about different scenarios but it really comes down to the property. If you are wondering why it may be a good idea to get a buyer's agent I think you have your answer right!?

God I hope so because we are basically free to work with. Interview a couple realtors and get someone on your side that will work well for what you want. That should be your next step.

0 votes
Linda Lorenzo, Agent, McKinney, TX
Tue Mar 5, 2013
If this is a FNMA home (Fannie Mae) you can check on to see if it is listed there, just put in the address. If it is there are lenders who can do Homepath loans and it may even be elibible for a Homepath renovation loan.
0 votes
The easiest solution indeed! Although I have heard the financing is not that great compared to other loan products.
Flag Tue Mar 5, 2013
Harry Greenb…, Agent, Minneapolis, MN
Tue Mar 5, 2013
These deals tend to get very complicated very quickly. Are you working with a realtor yet? Chase below has some good advice but every deal is different. There is perhaps a house you could find using a conventional loan and I would be delighted to help you. I mostly work in Phillips-55407. Contact me if you want some more ideas on this-
harry greenberg
Ride on Realty
612 -870-9418 or
0 votes
Chase Lenz, Agent, Minneapolis, MN
Tue Mar 5, 2013
Talk with your loan officer that you are qualified for the conventional loan with and see if you cant get qualified for a 203k rehab loan. Otherwise you would have to go through a bank who does investment type rehab loans. They normally want you to put 25% down for these kind of loans. If you don't have that, we can talk about a strategy to use hard money for the rehab with your conventional loan as a take out loan once it's fixed up.

Call or email to talk more.
Chase Lenz
0 votes
Donald James, Agent, Edina, MN
Tue Mar 5, 2013
Talk to your professional Realtor and / or mortgage professional. With rehab loans it is very important to deal with professionals who have done many of these. Call me if you have any questions.
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