Saturday, April 21, 2012

Home Inspection Experience

So much has happened these past two weeks. As a recap, I opened escrow April 10, 2012 and it will officially be three weeks this upcoming Tuesday. To be honest, nothing happened these past tho weeks, but a lot of running around and learning. I've learned that it is sooooooooo important to have an inspection and a contractors bid the moment you find out your offer was accepted. With a 203k Streamline Loan, the lender needs a contracts bid (who is licensed and insured) and they need it fast! When my realtor told me I needed an inspection and a contractors bid, I was on it! I was having a hard time finding someone because none have worked with a 203k loan before and although it is not required that they have, it would make the paperwork process much easier.

The first person I scheduled was an inspector and guess what???? She said she had a contractors license! You know what that means? I do not have to meet anyone else to get a bid!! I can kill two birds with one stone! This is wonderful I am doing great so far. Let's call my inspector Tina the TIGER! Ok - so my realtor and I met with Tina the TIGER at the property and we went through every inch of the house which was great. We started in the front of the house and located the three gas meters which were under the house (my boyfriend and I couldn't find them on our previous visits) and saw that everything looked good. We moved along the property and started to pin point things that will be needing attention in the future, etc, but so far nothing big. She went into the basement and noticed that underneath one of the restrooms there was water damage and possibly, terminate damage! The seller normally pays for a terminate inspection (which would be performed later) so I wouldn't know if it's terminates or water damage until then.

To summarize everything, the house wasn't in bad shape. The roof seemed new and there was a few outlets that were not grounded, but the back duplex was all ground, which was great! No electrical work needed there! The real problem laid underneath the house....the pluming! Of course, everything was galvanize with a few parts being copper. Even with that discovery, I was still very excited about this property. I can already see my golden retriever running all through the yard seeing what he can chew!

After we were done inspecting the property, she gave my realtor and I her business card saying that she doesn't include her license number in her business cards because people use it! I was disgusted when she said that, I just can't believe people would do such a thing! As we talked more, I asked her if I can get her license number for my records, and of course she said..."Well... in California inspectors aren't required to be licensed." I was completely shocked that she lied! I had also asked her on the phone and before she answered me she paused and said "Yes, I am a licensed inspector." The other big question remained....

me: "Are you a licensed contractor?"
Tina the TIGER: "I do have it, but it expired back in the 90's"

Ohhhhhhhh great! The lies! I was disappointed that she lied, but I didn't give myself time to react towards her, but rather trying to find a solution to my dilemma that 1) I paid $395 to an unlicensed inspector and 2) I don't have a bid! She still had the nerve to say "You aren't giving this report to the bank right?" I replied with "they are the ones that requested one!" she said "Oh, Sh**t" I asked her what was the big deal, and she said that she didn't want the bank to think the property needed too much work.

On the good note, my inspector was very respectful, timely, and detailed. She not once try rushing me out of the property. I later found out that California does not require inspectors to be licensed, so she was telling the truth about that at least.

She provided me with a detailed inspection report two days later (some inspectors normally complete it the next day) that included pictures which was fun to look over at a later time since the pictures helped refresh my memory. I will try to see how I can upload the inspection report to my blog so you can all get an idea of how an inspection report looks like.

If you are buying your house for the very first time, it is nice to get an inspection because you get to learn so much of the property you are buying. However, I also believe that if an inspection report is not required, do not get one (unless you want to). It is best to get a contractor to inspect the property and tell you what needs to be replaced, etc. Just a though to help you save money in this costly transaction.

The next few days I will be focusing on getting contractor bids, let's hope they aren't filled with lies!

Monday, April 16, 2012

FHA203K Loans

With all the research I did regarding Fannie Mae Homepath Financing (FMHF), I will not be financing my purchase with that type of loan - Instead, I'll be using FHA 203K Streamline. The only reasons why I will not be using FMHF is because they will only finance 75% of my home purchase due to it being a multi-family property.

My attention will now turn to 203k loans! These loans will finance repairs needed AND wanted on your new home! Luxury repairs such as a pool, spa, etc., are not allowed. You will also need a person who is licensed to do the repairs. This type of loan should definitely be considered when you walk into a house that needs a lot of repairs. A lot of buyers are turned off when they see an ugly house and simply just walk away. A savvy person will NOT be turned away mold this "ugly" house into something you love!

There are two types of 203k loans, standard and streamline. The standard loan is the more complex one since repairs will be over $35,000 with no limits! (The only limit will be how much you were approved for).
You will need a consultant for your 203k standard loan who will begin working after escrow closes. The second type of 203k loan is streamline. Streamline is for repairs between $5,000 and $35,000. A consultant is not required, but again, you cannot do the repairs yourself unless you are licensed.

I will be going with a streamline 203k loan and will be financing the major repairs that the house needs (roof, floor, plumbing, electricity). Anything in addition to that, I will repair with my own money instead of adding it to my loan as I do not want my monthly mortgage payments to be too high.

I've been in communication with my escrow officer and she is really good. I love when someone can respond to my e-mails the same day. My escrow officer replies to me in minutes! She leaves no time for me to worry about anything. I love it! I sent my $1,000 earnest check last week to open escrow and what they are waiting for now is the loan documents. What my mortgage broker said I needed to do was get bids from different contractors for the repairs required on the home. I am scared to know what damages this house has.

I am glad that the listing agent was kind enough to add in the addendum that Fannie Mae will pay up to $4,000 in repairs required by the lender. These "required repairs" are health and hazard issues such as:

1) Broken windows
2) Double strapped boilers
3) Rails missing in stairs
4) Visible flooring (such as rug missing, etc.)

The house needs to be "liveable" and therefor all utilities (water, gas, electricity) need to function properly.

I will be contacting 203k contractors this week to get bids on the work required and will be letting you know how that goes. Also, to save money, have a contractor tell you what is FHA required or what are "health and hazard" issues of the property instead of an inspector. An inspector will just pass through the house and call out all things that need to be looked by a professional, such as a plumber, electrician, etc., because "he" isn't one... You will then need to pay the inspector, all professionals he required (electrician, plumber, etc) AND in top of that you'll still need to get a contractor to see how much those repairs are going to cost! To make it simple just pay the contractor who will tell you what needs to be fixed AND give you a price of how much you can fix it for... so much more informative and valuable.

Thursday, April 5, 2012

What Happens After The Week Your Offer Gets Accepted...

To make this short, nothing has happened in one week. I am not sure what the normal waiting process is in closing an REO* property, but I really want to start working on this house. It needs a lot of updates and repairs, but I really enjoy getting my hands dirty. I've been spending time researching the best colors to paint houses and how to make them more "cozy." One tip is that lighter colors makes a room look spacious.

[*REO - property that was foreclosed and now owned by the bank]

If you are going to buy a multi-unit* homepath property please be aware of the following financing problem. Fannie Mae has specific lenders who provide "homepath financing" with as low as 3% down payment, no private mortgage insurance** (PMI), and no appraisal***. All this sounds great, but they charge higher interest rates AND the 3% down rule only applies to single residential homes and it needs to be owner occupant.

[*multi-unit - more than one living unit in one lot]
[**PMI - Insurance on your mortgage in case you default on your pymts. This seems like something the banks should pay!]
[***Appraisal - A person who values the property to see how much it is worth and does this by comparing recent sales in the neighborhood along with other analysis]

I invested a lot of time researching this because all the banks I called quoted me at 20% down! It would be nice to have that much money, but I don't! I only have as much as 5% to put down and a little more cushion for closing cost (being quoted at $6,500) and repairs. I called almost every lender listed on Fannie Mae's website and they were all quoting me with about the same down payment rate, I started to panic! It's unfortunate when you fall in love with a house and cannot find a lender for as little as $185,000 with a low down payment and considering that it is my first home, I'm going to be living there, and my credit score is 730! I would of thought lenders would want to marry me!

Fannie Mae allows their special lenders to finance a multi-unit property up to 75% and a single residence property up to 97%. The good thing is that private companies make their own rules and can finance up to whatever amount you qualify for without having to follow Fannie Mae or any other bank rules (credit unions, private banks are more flexible).

Just so you know, other loan types I looked into are FHA (house needs repairs, wouldn't qualify) and conventional (higher origination fees). Although homepath financing has slightly higher interest rates, I am glad I do not have to pay for PMI or for some appraisal guy to come value the property. A new thing I learned is that since this property has 3 units, I would have had to pay for 3 appraisals! That's insane!

Tomorrow (4/6/12) will officially be one week since Fannie Mae accepted my offer. This deal suppose to close at the end of May and I am praying everything goes smoothly. I am open to any questions or comments you may have. You can also e-mail me if you need to. I'll keep you all posted!