FHA home loans?
My son is approved for an FHA loan, and we found a really great house in his price range, but it is a bank repo. His Mortgage loan officer said that he can't use FHA on repos. Is this true? She also said he couldn't purchase a HUD home either, but found out that, that wasn't true.
The home is in immaculate condition.
- 1 decade agoFavorite Answer
FHA has certain guidelines that it follows in order to determine the insurability of a property. The reason that foreclosed properties are often somewhat risky is that many things can go wrong during the foreclosure, for example, a creditor may not have received proper notice of the sale (making it not a good sale so it would have to be restarted with proper notice or damages paid out) or the previously foreclosed home owner can file an action to contest the sale (for example, there is a dispute about payments that were sent in). There used to be a 90 day waiting period (after foreclosure) to try to protect FHA from getting involved in these types of legal problems, but I believe it has been temporarily waived to help the fledging housing market. I'll post a website so that you can review it and show it to your loan officer, so that you know which questions to ask.
Basically, the previous restrictions were not because foreclosed homes weren't in immaculate condition - it's because they were viewed as more or a lawsuit or unclear title risk to lenders.
*Please note that this is just my general opinion and does not consitute a formal legal opinion nor form an attorney client relationship; I am licensed in Arkansas.
- 1 decade ago
Your son's mortgage loan officer is old-school. FHA appraisers use to have strict guideline regarding the type of house they would allow for an FHA mortgage, but those guidelines were changed several years ago. Repos generally had some damage to them - that is why his loan officer said that. A HUD home is just a repo that is owned buy HUD - the same agency that insures FHA loans. And yes, you can buy a HUD home with an FHA loan.
Get another loan officer who knows what they are talking about and keeps up with changes in the mortgage industry.
- Expert8675309Lv 71 decade ago
Ha...the loan officer is a l-i-a-r.
I used to underwrite FHA loans....that means I had the authority to approve them.
Go the branch manager, ask for another loan officer, and keep your loan where it is (don't penalize the bank for what one person did). Tell the branch manager what this person told you.
In some states, an LO making such a statement is against the law, especially if that state requires an LO to be licensed. Find the Banking Commission in your state and file a complaint.
I wish you luck.
PS: The LO didn't make an innocent mistake either...everyone in the business knows you can buy HUD or repo loans with an FHA loan as long as the home isn't falling apart.
ALL SLABS AND FOUNDATIONS HAVE CRACKS IN THEM...all of them. As long as the crack doesn't exceed 1/4", it has ZERO bearing on the value of the home.
It takes SEVEN years for a concrete slab to completely cure to the core.
NO inspector is responsible for ANY defect in the property that cannot be seen with the naked eye.
- 1 decade ago
One issue with FHA and foreclosures is that the bank does not have to make any disclosures regarding the foreclosed property. So there is no guarantee as to the condition of the property and it's up to the buyer to verify that with all the appropriate inspections. But, even inspections can miss things that can be extremely important (cracked slabs and foundations, for example). And, in that case, they would have granted a loan on a property that is worth a lot less than it was appraised for.
With a property being sold by an individual, the seller must disclose all conditions of the house that they are aware of. If any known fault with the house is not disclosed, but subsequently discovered by the new buyer, the buyer can go back and sue the previous owner - and the selling agent - for non-disclosure. So, the holder of the FHA loan can use settlement money to make repairs and the home retains its appraised value.
Note, however, that the statute of limitations is generally 2 years on non-disclosure issues (it varies from state to state).
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- sabraLv 44 years ago
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- 1 decade ago
hmm buy the house in cash