Can the bank do this to me? I am trying to purchase a forclosed home for 62,000. I want a conventional loan with 20% down so i will be barrowing

Asked by Kessaleigh, Austintown, OH Sun May 9, 2010

49,600. The appraisal came back at 85,000. The bank is telling me they can't give me a loan because the property is below average. They want me to get an fha loan and to barrow more money to fix the furnace, hot water tank, power wash the house, clean the gutters, and for paint and carpet cleaning (the carpet and paint are new and donot need fixed). I have exellent credit. I do not want to put this on top of my morgage. can the bank make me even though it was apprasied as is for 85,000.

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Tara-Nicholle…, Agent, Alameda, CA
Sun May 16, 2010
Technically, the bank cannot make you do anything, but they can withhold their mortgage funds unless you comply. Are you working directly with a bank or with a mortgage broker? You might considered working with a mortgage broker who works with many banks and can offer many programs with different guidelines (although pretty much any loan is going to require the furnace and water heater repairs).

You can actually do a regular FHA loan and have the major items corrected after the appraisal and final loan approval, but before the loan closes. The appraiser just has to come back out and make sure the items are complete. If you elect to go this route, it might also have some leverage to negotiate for the bank that owns the property to assist with the repairs - the furnace and water heater items are considered health and safety issues, which many banks will help with because they prohibit many, many buyers from buying the property.

That way, you don't have to add money to your loan, and you don't have to wait the extra time it takes to do a 203K. Of course, it does require that the bank that owns the place work with you on getting the repairs done. As good of a deal as it seems like you're getting, you should consider doing what you can to avoid losing the deal over a few repairs that itsounds like you'll need to make at some point very soon, in any event.
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James Gordon…, Agent, Hamilton, OH
Mon May 10, 2010
You need a working furnace and hot water heater to get a conventional loan from most lenders in our area. Do the 203k to aquire the property and then at the end of a year refinance out of it into a conventional loan. You can do energy efficient upgrades when you do the 203k so look for a furnace that qualifies for the federal tax credit. Your local utility company may also have a rebate on furnaces.
The 203k is not the worst thing in the world to deal with and depending on the contractor that you select there may be a lot of the things like gutter cleaning and power washing that you can do yourself. They may have to quote it in the bid but if you do the work they do not have to charge for it.
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Sean Dawes, , Philadelphia, PA
Sun May 9, 2010
Im assuming the utilities arent working or the property is being deemed as unlivable. That is why they are denying you the conventional loan. Your only option for this property might be the 203k loan they are probably suggesting. Why not go fha and do a fha 203k so that you only need 3.5% down cash and then you have that extra 16.5% cash to put in savings? If this is the house you truly want, and you CAN afford it, then that might be the only option. If you CANT then walk. Don't end up getting into something you cant handle

Sean Dawes
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