Posted by Sherry W on February 16, 2001 at 11:43:06:
Thanks everyone for your advice. You GUYS are GREAT!!
My buyer has E+ credit and only 22 yrs. old. Been having a difficult time finding quailified buyers.
Finally found one and it’s FHA. Getting all my paperwork together for Banker.
Keep you guys posted how it goes. Wish me luck…
Thanks,
Sherry W
FHA, Ship Program & BB Gun!!! - Posted by Sherry W
Posted by Sherry W on February 16, 2001 at 08:08:46:
Hi,
I have been reading through the archives on seasoning. Great info. I have a buyer, contract and there are going FHA & the Ship program(first time w/ this program).
Could anyone tell me the best way to present paperwork for the repairs I have done? I also have to show all of my receipts.
Also, over the weekend some kids shot the window with BB’s, now I have to replace the window(Big window), also shot the siding(need to replace-2 sheets).
Should I do repairs before or after Inspector comes?
Buyer has excellent credit & is going thru her bank. Banker said might be problem because I have not owned house for 12 mos. HELP!!!
Would appreciate any help/advice on this.
Thanks,
Sherry W
Re: FHA, Ship Program & BB Gun!!! - Posted by Ron (MD)
Posted by Ron (MD) on February 16, 2001 at 08:45:31:
Sherry,
I don’t know anything about the SHIP program, but I have recently sold rehabs with FHA financing.
I have been asked to document the repairs I’ve done and my standard approach is to give the lender a one-page summary showing the 15 or 20 larger things I’ve done. On a few occasions, I’ve also given them a copy of the actual scope of work (6 pages) used for the project. In one case, I provided the lender with copies of my repair receipts (a 19 page fax!).
The lender told you that it might be a problem with an unseasoned property. You need to confirm that the lender doesn’t have a problem with it. The loan officer can talk to underwriting and determine this immediately. If it’s a lender problem, your buyer needs a different lender. If it’s an FHA problem, you can’t do anything about that until FHA reviews the file…which isn’t until after the lender has approved the loan.
Finally, you asked about doing repairs before the “inspector” comes. I’m assuming that you meant “appraiser”. FHA will not approve a home with broken or cracked windows. (I don’t know about the siding.) You will have to repair the window prior to settlement.
No matter how good a job we try to do on our rehabs, the FHA appraiser almost always identifies a few minor problems that must be corrected prior to settlement (e.g., repair a cracked sidewalk, add a handrail, etc.). Based on that, it is likely that the appraiser will have to come back a second time for a re-inspection. Since he/she will have to come back anyway, I wouldn’t repair the window until later (prior to the re-inspection). You can schedule the re-inspection just a few days prior to settlement.
This way, you delay putting in a shiny new window for the neighborhood vandals to shoot at again. The later you can put that in, the better.
Ron Guy
Re: FHA, Ship Program & BB Gun!!! - Posted by Terry (IN)
Posted by Terry (IN) on February 16, 2001 at 08:39:52:
Sherry,
FHA and most banks are really cracking down on the seasoning issue and wanting you to substantiate the difference between your purchase price and selling price. They want to see receipts for repairs. You can do away with these restrictions by owner financing your properties and then selling that note to a buyer at closing.
Best wishes,
Terry(IN)
Re: FHA, Ship Program & BB Gun!!! - Posted by JPiper
Posted by JPiper on February 16, 2001 at 09:02:07:
Ron:
Haven’t been doing FHA loans here just recently, but back when I was doing them more actively I used “direct endorsement underwriters”…meaning that they gave in-house approvals for FHA loans. There was no separate FHA approval in the process. I believe they were subject to an audit…but in general their status gave them more underwriting flexibility for those cases where they chose to use it.
I would be surprised today if most lenders are taking their deals to FHA approval prior to funding, unless this is some type of new aspect to the “seasoning” issue. Today I would think that most of the lenders, certainly most lenders of any size, would be direct endorsement lenders and could approve deals internally for FHA.
Just a comment Ron…like I said I’m not actively doing FHA loans today.
JPiper
Terry’s right, but… - Posted by Ron (MD)
Posted by Ron (MD) on February 16, 2001 at 08:52:11:
Sherry,
Terry is right, you can avoid FHA by providing seller financing and selling the note. The drawbacks are you need to find a buyer willing to pay a much higher monthly payment than he’d have to pay using FHA financing and the “helpful” notebuyer will put a big chunk of your profit into his pocket.
I was very concerned about the FHA/seasoning issue, but it has not stopped a single deal (although it does add a week or two to the process for FHA’s more thorough review). I do avoid FHA buyers when I can (preferring conventional programs that take FHA out of the process), but I’d have be really desperate to give 1/3 to 1/2 of my profit to a notebuyer that crows about how easy he’s made the sale process.
Just my opinion.
Ron Guy
Re: FHA, Ship Program & BB Gun!!! - Posted by Ron (MD)
Posted by Ron (MD) on February 16, 2001 at 09:19:42:
Jim,
This is a new wrinkle related to the flipping/seasoning issue…at least here in Baltimore.
Ron Guy