Can you put additional money toward down payment prior to close and drop PMI? (loan officer, 2013)

[SelfEmployed75]

I applied for an FHA loan based on a 3.5% down payment (which comes with a PMI payment due to no 20% down payment). Thing is, it's new construction and not scheduled to be ready for 7 months. In that time period, I may be able to raise the funds and put down 20% by closing time.

Can the loan be changed right before closing or what's the cut off? Is there a fee to redo the paperwork normally or any penalty?

[FalconheadWest]

If you're not closing for 7 months, you don't have anything locked in right now. No lender is going to do that. You might have a pre-approval, but you would have to resubmit all paperwork again as nothing will be valid in 7 months.

[SelfEmployed75]

From what I understood, and I specifically asked, they said this is an actual approval and not a pre-approval. We had to submit everything and they said it'll be around 3 weeks before we get an answer. The sales contract does say that after approval, they may ask for updated documents. But it was my understanding that as long as nothing changes in a negative sense, this is an actual loan approval and they will start building the house once approved. We are using the builder's mortgage company BTW.

[SmartMoney]

Proceed with your FHA preapproval. The appraisal isn't going to be ordered until the property is 95% complete, anyway. Get the builder the FHA approval with the lender, and be prepared to close FHA if you cannot get the conventional approval.

When you are within reach of having the funds for the 20% down, or it's pretty evident you will have it and can show a budget of where it's coming from, tell your lender you want to apply for a conventional loan. Tell them you do not want to jeopardize the FHA approval in any way. There's no way you can be forced to close with an FHA loan if you are qualified for a conventional loan. There are some bumps to watch for, but be upfront with your lender, put it in writing so there is a written record of your desire. Ask for the loan officer's assistance to facilitate this plan. Hopefully, they will reply in writing, again for your record.

90% of my business is new construction. We do this all the time, but the buyer has to be prepared to close under the original terms for the approval, in the event the preferred financing cannot be obtained. If the builder's lender is not willing to assist you with what is in your best interests, change builders. It's not worth a major financial mistake. There are a few builders that would send you away, but most will work with you if you are up front about your game plan.

[SelfEmployed75]

I would need to stay with FHA because of Chapter 7 bankruptcy that was discharged in Jan. 2010. From what I've read, a conventional loan requires 4 years minimum from the discharge date.

It's possible to do an FHA loan with 20% down, right? I'm hoping it is. Are there down sides?

[SelfEmployed75]

Also, along the same lines, can an additional person be added to the loan at a later time if it's a 6-7 month time frame before the sale closes?

Right now I applied by myself because my husband has some negative accounts on his credit report but they are all scheduled to fall off in Feb/March 2013. Having both of us on the loan, and therefore both of our income, would make the qualifying a lot more solid.

I know it begs of question of why didn't we just wait until March to apply but we found a new build home that we really love the layout of and the lot it's on. The homes are selling pretty quick and only 10 or so lots (out of around 60) are still available. Most likely the development will be sold out by March.