Foreclosure in 77864>Question Details

Donna Selman, Home Buyer in Madisonville, TX

wanting to buy a foreclosed fanny mae house, been pre-approved with FHA but the agent representing F. Mae says they will not accept FHA what's

Asked by Donna Selman, Madisonville, TX Thu Feb 16, 2012

up? The agent said FHA will make them fix some things and they want to sell it like it is. However I went on Fanny Mae and Freddie Mac's website and they both stated they accepted any financing.
I just feel like I'm being descriminated against. This isn't my first house to buy, although it is my first foreclosed one. I'm a single female, 56 yrs old, good job, and a credit score of 689.

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Millie Lumpkin’s answer
In addition to the earlier advice, I would also recommend that you get a buyer's agent to help you in your home search. An REO agent can handle a large inventory of properties at any one time. This is the seller's agent and the interest is in getting the property sold. You need an agent focused on helping you find your home, answering your questions and making sure you understand the process. Even if you have bought a home in the past, a buyer's agent is familiar with the trends and issues in this market.

Good luck with your search.

Millie C Lumpkin, SFR
Phone: (312) 217-5644
0 votes Thank Flag Link Thu Feb 16, 2012
Hi, Donna,
As a REALTOR® who formerly worked in Madisonville and still serves that market area, I am familiar with the type and price of homes for sale. I am not familiar with the property in question or any of the finer details of this prospective purchase, but based upon the information you have provided, I would offer the following thoughts:

A traditional FHA Section 203(b) home loan - which you are likely seeking to obtain for your purchase (correct me if I'm wrong!) - is intended for Buyers who will be purchasing a home in move-in ready condition. Because FHA will be insuring the home loan for the benefit of the lender, FHA wants to be certain that the property is not in a state of disrepair or poor condition that would detract from the home's marketability and value in a future foreclosure sale. When you find a property you wish to buy and enter the purchase process, the FHA-certified property appraiser and loan underwriter will note if there are any repairs that need to be completed in order for the property to be approved under FHA 203(b) loan guidelines. These repairs must be completed before the day of closing.

In a foreclosure situation, the bank or other entity that owns the foreclosed property will generally, a) NOT agree to repair any property defects, and b) NOT permit the Buyer to perform any repairs before closing.

The listing agent may be describing this scenario: The property has serious defects that FHA 203(b) loan guidelines require to be repaired before closing. The owner of the foreclosed property won't repair these problems or permit you to do so; thus, it can be presumed that your loan underwriter won't approve the home for purchase.

Some suggestions:
• Make sure you have a REALTOR® representing you and working on your behalf to guide you through this purchase process. He or she needs to be familiar with foreclosures and the FHA loan programs in order to help keep you informed and give you the best shot at success with your purchase.
• With the help of your agent, make a list of any items in disrepair or home defects that you or the seller's agent are aware of. Share this list with your loan professional.
• Discuss this matter with your loan professional and seek their thoughts. Ask them, Am I using the right loan program to buy this home in its current condition?
• Ask your loan professional about the FHA Section 203(k) Rehabilitation loan program that can help a qualified buyer purchase a home that is in need of serious repair work. 203(k) loans can include financing for necessary repairs that will be completed by an approved contractor after closing.

Without knowing the particulars of this situation and home, and without representing you as your agent, I can't provide you more specific counsel than this. I hope this information will help you as you seek to achieve your real estate goals! Contact me if I can be of further assistance.

David Companik, REALTOR®
Keller Williams Realty - The Woodlands
Web Reference:
0 votes Thank Flag Link Thu Feb 16, 2012
FHA appraisals require that a house be safe, sound, and sanitary. If the items needing repair are minor, it is possible to close a regular FHA loan with an escrow for repairs. Usually that limit is $5,000.

However, if the situation is more severe than that, ask about doing a Homepath Renovation Loan. Fannie Mae will allow you to get bids for your desired repairs and add them along with the sales price to determine the total loan amount. It's more complicated, to be sure, but it can be done. We can do up to a 97% loan on the total, but there would be a higher rate with that credit score.

Finally see if the house is regular Homepath eligible. Then Fannie doesn't require an appraisal or PMI. It will close quickly, and you can make repairs later.

Good luck!
Barbara Coker

NMLS# 228545
Web Reference:
0 votes Thank Flag Link Thu Feb 16, 2012
FHA financing does require certain standards. You can talk to your loan officer and get a list of guidelines. Some things might be no broken windows, no structural issues, flooring in tact, etc. Believe me they are doing you a favor if they're pretty sure it won't qualify under FHA guidelines. Otherwise you might spend inspection money and appraisal money, only to have the appraiser come back and say it doesn't qualify. Then you would have spent $800 of non-refundable money or so to figure it out.

We need to get you in touch with a great realtor who can show you homes that might qualify for FHA financing. Not every home will. It can be common that some or many foreclosures might not qualify.

FHA wants to help insure you get a good and livable home, not one that needs work or has problems.
None of this is 100% guarantee, but just guidelines to help you down the right path.

Keep after it, sounds like you are on the right track.
Web Reference:
0 votes Thank Flag Link Thu Feb 16, 2012
Bruce Lynn, Real Estate Pro in Coppell, TX

It might be that they already know it will not pass FHA inspection.
The seller does NOT have to fix anything. And that is not discrimination.
0 votes Thank Flag Link Thu Feb 16, 2012
Try to qualify for an FHA 203K renovation loan. You can still do FNA with only 3.5% down and a seller concession for your closing costs and prepaid items, but they will also lend you the money to do the repairs so you can get into the house with an FHA loan and still purchase it 'as is'. I am surprised the listing agent doesn't know this!
0 votes Thank Flag Link Thu Feb 16, 2012
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