Does Going With Conventional Financing Avoid Having To Make Required Repairs?

If FHA/ USDA/ VA loans require repairs to be completed prior to closing, why not just switch to a Conventional Mortgage? As long as the buyers qualify, we won’t have to worry about doing any repairs to the home.  Besides, many of these homes are foreclosures, and many banks, Freddie Mac, Fannie Mae, HUD, and others won’t allow the properties to be touched prior to closing.  Wrong! The appraisers have been going through a scrutiny as of late.  The level of responsibility to report accurate and concise information of the homes, has increased exponentially.  Appraisers are being told that they can be held liable for any unreported issues, so appraisers are now required to take pictures of every room in the house, and they must note any unusual abnormalities that can effect the marketability of a home. They must give the home a Quality rating, too.  They are given a rating of  C-1 to C-5. A rating of C-3 is considered average.  When the Conventional appraiser reviews the home, they are still taking pictures and making notations of things like: Stains in the carpet, water stains in the ceiling, holes in the wall, missing molding, broken windows, water in the basement,etc.  Even though none of these is structural in nature, banks are requiring these items to be fixed because they are concerned about safety and soundness issues with the property.  The average quality rating is expected, and anything below that rating requires repairs to be made before the buyer can take possession of the home.  Once these repairs are completed, the appraiser must go back out to the property and reinspect it for the bank.  The appraiser verifies that the Quality rating is up to average. There are two ways that this situation can be dealt with.  Either the buyer does the repairs on a home that they don’t own, which can be time consuming and unacceptable to a seller, or they can apply for a rehabilitation loan.  A rehab loan is one where a buyer obtains an estimate of repairs from a contractor, our bank holds the amount of money in an escrow account.  Once the required repairs are complete, the bank pays the contractor direct for the repairs, or reimburses the buyer once they have been shown that have been completed.  Most lenders can’t do any type of Rehab loans, or they offer the FHA 203K, which is arduous and expensive.  I can do a standard conventional rehab loan, requiring as little as 5% down payment.  Regardless which way you want to go, please know that switching the type of financing to Conventional doesn’t promise any different outcome.

Buyers with Credit Scores Below 620 are Financeable

Does your lender finance anything below a 620/640? FHA/VA/ USDA loans are all regulated by the government. They don’t truly have minimum credit scores, but lenders have what is called overlays. http://www.thetruthaboutmortgage.com/what-is-a-lender-overlay/ These overlays are a set of rules specific to each lender. Most lenders sell their mortgages in large pools to investors. These investors set minimum credit score requirements for loans that they will purchase from these lenders. Since each lender has different investors, there are different minimum score requirements per lender. I deal with many different lenders, and I have a very reputable one who will go as low as a 550 score on all three types of mortgages: VA,USDA, and FHA. Other lenders are required to receive approvals from an automated software system specific to the type of loan requested, in order to close and fund these types of mortgages. My lender underwrites the loan manually, which means that they don’t have to receive an automated approval through any of the government software systems. This allows me the ability to finance many more ready, willing, and able buyers. In order to finance any of these buyers with sub 620 scores, they are required to provide 12 months rent checks evidencing they’ve paid all of the payments on time. The lender will not accept rent receipts, money orders, or letters from a landlord/apartment complex. In addition, the buyer will have to furnish 12 months checks or a printout from at least one utility company to evidence timely payments. The most common types are cable, internet, cell phone, electric, heat, and car insurance. Any of these will work, and the lower the score, the more utility references we may require. If you know of anyone who may fit the description of a buyer who is capable of owning a home please have them call me. I will give them an answer within 48 hours one way or another.