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!

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