FAQs for Realtors

FAQ's for Realtors


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Do we need to do a termite report?

It depends on the lender, whether the appraiser notices termite damage and asks for a more in-depth inspection of the problem, and of course it depends on the loan program.
However, in general, if the contract calls for a termite report and repairs, then the lender will see this as a contractual obligation.
If the parties have waived termite then, in general, lenders will not require it.

The seller wants to rent back. Is that ok?

Yes.
The loan docs for an owner-occupied loan state that the buyer must promise to move in within 60 days and live there for a minimum of 1 year.
So the seller can rent back for up to 59 days, or before the close of Escrow.

How many days do we need for a loan contingency?

This depends on the quality of the borrower’s credit package.
If the borrower is strongly qualified, an approval can take a few hours.
However, if there are credit issues, employment issues, or if you are asking for an “exception” to the underwriting guidelines, then at this time, lenders are taking up to 7 working days.

When is my client’s rate locked-in?

This is a great question since some banks only lock-in after the appraisal and some lock-in after the full application is received. This means that if the market moves up they get the higher rate.

How long is a rate good for?

The interest rate the buyer is locked in to, or guaranteed, is usually based on the escrow period.
How long it is good for depends on how far into the escrow period you are.

I just had a bad appraisal done on one of my listings. What can I do?

Depending on the loan program, you can provide better data, or write a letter stating where the mistakes are in the appraisal.
Either the appraiser will agree, and make the changes or not.
You will have success if the value or outcome is based on bad or faulty data.
If it is the subjective part of the appraisal then you may have an uphill battle.
Conventional loan appraisals are easier to have changed than VA and FHA.
Please note that the PMI companies are very careful to review every appraisal and will quickly realize if they think the appraisal was “stretched.”
Work to repeal the HVCC law. This has made the conversation and expediency of appraisals difficult, and the most qualified appraisers don’t get paid for their expertise.

Is it true that FHA will make us repair the entire house?

FHA (Federal Housing Administration) does not require anything.
FHA is a division of HUD, and has assigned the task of measuring risk to the appraiser, and the underwriter.
The underwriter and appraiser will follow the HUD guidelines, which say that the property must be inhabitable and free of any health and safety risks.
So yes, the seller may have to fix peeling paint, torn carpet, cracked tiles, severe cracks in the driveway or walkway etc.
Remember, it’s about health and safety.

Is it true that FHA is for low income borrowers?

No.
FHA has no income limits.
It is a loan backed by the federal government that allows home buyers with a low credit score, or with little money to put down on a home, to qualify for a loan.
However the client does have to qualify with full docs, taxes, and pay stubs.

Besides the down payment, what other money will my buyer need?

Your buyer will need the Earnest money deposit, home inspection, and appraisal fees up front.
The total cash needed depends on the contract that you negotiate.
The down payment, pre-paids (also called recurring), and non-recurring closing costs are the total needed.
Of course the seller and lender can both help cover these costs.

Is it true that investors have to put 30% on 4 units?

No.
Fannie Mae and Freddie Mac allow 20% down on investments up to 4 units.
However, the interest rate is about 1% higher on a 20% down 4 unit purchase than on a 30% down.

How much credit can the seller give my buyer?

Depending on the loan program, the seller can give 3-6% credit towards closing costs.
Depending on the program, these funds can go to non-recurring closing costs or both recurring and non-recurring.

The seller doesn’t want to do termite work, is that ok?

Yes.
So long as all parties agree and there are no signs or concerns in the appraisal, or the visual review of the pictures, by the underwriter.

The seller has 3 termite reports. Do I have to give all 3 to the lender?

No.
You should use the most recent report.
If the seller is the one doing the termite work they may chose whichever report they want.
However, you should discuss the differences with your client to make sure the one chosen, and the work required, is compatible and complete.
Lenders require the termite inspection with repairs to be completed within 90 days of funding.
If they are given more than one report, they have to require that all the work from all of the reports be completed.

My client has no credit. Can you still get him a loan?

Yes.
FHA and first time buyer programs under Fannie Mae and Freddie Mac allow for the client to have a “blank” credit report and use “alternate” credit.

My client has a bankruptcy. Can he still get a loan?

Yes.
However, two or more years must have elapsed from the discharge depending on the type of bankruptcy and the type of loan program they are applying for.

My client has a foreclosure. Can she still get a loan?

Yes.
However, depending on the loan program three or more years must have elapsed.

My buyer is being given “gift” money. How much can she receive?

Your buyer can receive as much as their generous donor is willing to give.
However, if they are given less than 20% of the price they need to come up with 5% of the price of their own money.
Also, the gift must come from a family member or someone with a close demonstrable relationship, like a church or recognized non-profit.

My client is not a U.S. citizen. Can he still get a loan?

Yes.
You do not need to be a U.S. citizen to get a home loan.
However, proof of residency is required, such as an Alien card or visa.
Certain types of visas are ineligible such as diplomat’s visas.
For more details send me a scenario at athena@athenapaquette.com as certain guidelines apply depending on the loan type.

My client just graduated.  Does she need to wait 2 years before she can qualify for a loan?

If she graduated from a higher degree or technical program, and has a job in the same or similar field as her degree, then she does not need 2 years of employment.
However, if this is a high school or GED program then 2 years are required.

My client is self-employed and has a lot of write-offs. Can he still get a loan?

Yes.
He can still get a loan if self-employed, but he must qualify on the income stated on his tax return.
Some deductions will reduce their qualifying income and some do not.
If you’d like to know more please contact me the actual returns for analysis.

Can a seller credit for a buyer on a FHA loan go towards recurring and non-recurring closing costs?

That’s a great question!
Yes, a seller can pay up to 6% of the sales price for both recurring and non-recurring closing costs.
Recurring costs are also called pre-paids. They include taxes, insurance, and interest.
Non-recurring costs do not repeat unless there is a new transaction. They are the “hard costs” such as title fees, escrow fees, notary, up-front mortgage insurance premium, county fees, and all costs that are related to the transaction.
Also, the differentiation of “allowable versus non-allowable buyer charges,” with FHA and VA, have pretty much disappeared.
On Fannie Mae and Freddie Mac the credit from a seller depends on the down payment. This is 3% from the seller for 3% to 9.9% down, and a 6% credit if the buyer has 10% down or more.
Please note that the seller can only pay 2% credit if the buyer has purchased the property as an investment.
So when in doubt check with your lender.