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My fiance and I will be applying for an FHA loan for a house (being sold as-is) we really love. We are going to be applying for the loan using non traditional credit. We haven't had an inspection done on the house yet, but I know the detached garage will not pass because it is in need of a new roof (wood and shingles). I have read that any problems found during inspection have to be repaired before the bank will put the loan through. Therefore, we would need to get an FHA 203k loan that would lend extra funds to have the repairs done within a few months after closing on the house. Unfortunately the lender we are working with does not do 203k loans using non traditional credit. Does anyone know of a lender that will do an FHA 203k loan using non traditional credit in the chicago land area? We have the money to repair the garage, but I do not want to put any money into the house unless I know for sure that we will be getting it. My other question is does anyone know whether or not we could set up an escrow account with the bank using our own money so that the bank could have a guarantee that the repairs will be made right after closing? In other words, we will give the bank the money needed to make the repairs and authorize them to pay the contractors directly. In theory this would be just like an FHA 203k loan, however the funds in the escrow account would have come out of our pockets but at least the bank would have the money in their hands.
Issues related to the FHA appraisal would need to be remedied prior to approval in "Regular" FHA financing.
NEVER MAKE REPAIRS TO A PROPERTY YOU DO NOT OWN!!!
K is a great program. If you can find a lender to help you, it sounds like this would be your way to go.
What do you mean "Non Traditional Credit". There are still mortgage brokers out there committing mortgage fraud for the sake of making a deal. DO NOT let a lender push you into a fraud seem. People are going to prison for that now.
If you can't qualify for a mortgage using one of the many legitimate mortgage programs available, work on getting done what ever it takes to get you there.
An FHA buyer I had (in Dec.) purchased the home by escrowing 1.5 times the estimate to repair paint on exterior trim from a licensed and insured contractor. All the paperwork was sent to the underwriters and approved - in the contract amendment we put all terms of the escrow/repair agreement and then FHA approved the agreement pending there own standard escrow agreement that they use with the $ amounts time frames appropriate disbursements etc. filled in. There was a limit on how much could be escrowed based on sales price of home so if estimate for work is too much of a percentage to the best of my knowledge the program won't work.
An FHA buyer I had (in Dec.) purchased the home by escrowing 1.5 times the estimate to repair paint on exterior trim from a licensed and insured contractor. All the paperwork was sent to the underwriters and approved - in the contract amendment we put all terms of the escrow/repair agreement and then FHA approved the agreement pending there own standard escrow agreement that they use with the $ amounts time frames appropriate disbursements etc. filled in. There was a limit on how much could be escrowed based on sales price of home so if estimate for work is too much of a percentage to the best of my knowledge the program won't work.
HUD will allow this when the season prevents repair and the property is habitable as is.
Neither the lack of credit history nor the borrower's decision not to use credit may be used as a basis for rejecting the loan application. We also recognize that some prospective borrowers may not have an established credit history. For those borrowers, and for those who do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider. The lender must document that the providers of non-traditional credit do, in fact, exist and verify the credit information. Documents confirming the existence of a non-traditional credit provider may include a public record from the state, county, or city records, or other means providing a similar level of objective confirmation. To verify the credit information, lenders must use a published address or telephone number for that creditor.
As an alternative, the lender may elect to use a non-traditional mortgage credit report developed by a credit-reporting agency, provided that the credit reporting agency has verified the existence of the credit providers and the lender verifies that the non-traditional credit was extended to the applicant. The lender must verify the credit using a published address or telephone number to make that verification.
Neither the lack of credit history nor the borrower's decision not to use credit may be used as a basis for rejecting the loan application. We also recognize that some prospective borrowers may not have an established credit history. For those borrowers, and for those who do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider. The lender must document that the providers of non-traditional credit do, in fact, exist and verify the credit information. Documents confirming the existence of a non-traditional credit provider may include a public record from the state, county, or city records, or other means providing a similar level of objective confirmation. To verify the credit information, lenders must use a published address or telephone number for that creditor.
As an alternative, the lender may elect to use a non-traditional mortgage credit report developed by a credit-reporting agency, provided that the credit reporting agency has verified the existence of the credit providers and the lender verifies that the non-traditional credit was extended to the applicant. The lender must verify the credit using a published address or telephone number to make that verification.
Good reference. Thank You!!
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