appraisal; house has drywall damage (loan officer, fixed rate, heloc, pre-approval)
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I have a 62,000 HELOC on my tenant occupied condo and 20,000 HELOC on my owner occupied house and want to take a cash-out fixed rate mortgage on my house, probably 80,000 to 100,000 to pay both debts off and be otherwise debt free.
The loan is probably 50% or less of the house value and I will own the condo flat out.
I have decided to go with a loan from Wells Fargo.
the problem:
I had to tear up the kitchen ceiling and wall last week looking for the source of a leak and, probably worse, the moldings around my windows need reframing after new-window installation. (the house was a fixer upper, I have completely finished the outside, it looks great--the inside is not so bad; it's a pretty house with some older fixtures. The electric and plumbing is done ('cept for this leak)
The mortgage officer told me he doesn't know what will happen at appraisal regarding the drywall damage, but he suggests getting the appraisal and just see, in the meantime, get the work done ASAP. (I am looking for a contractor now; hard to find someone for a 'small job')
I could lock in the rate tomorrow.
What are my risks here? The worst I see is finding out months from now that I don't get the loan because of these (really small issues, a few thousand dollars worth of work at MOST) and wasting all that time; next hazard I see is spending money on the loan application and again, getting turned down because of the drywall.
Do you think I will get this loan? My credit is good. I am frightened of the 'fiscal cliff' and want to get my loan asap.
Thank you for the reply, Annemieke, no, I wouldn't think it is FHA, unless all loans are automatically FHA. Don't you have to apply for that specially?
Also, I don't care if the appraiser really lowers the value of the house--the computer appraisal is 192000, and let's say it comes back at 110000. That would still be fine. I'm happy to take out just 80,000. (My sister says I wouldn't want a lower appraisal on the record, but I can't see why.) My worry is that it 'wouldn't appraise at all', a phrase the loan officer used. (He hasn't seen the damage; it isn't that bad, just unsightly.)
The mortgage officer said something like they might just ask for a re-inspection before the loan closes.
The other thing we are going to try first is a drive-by appraisal, because I am asking for less than 50% the ostensive value of the house (and the outside is really fixed up nicely at this point) How common is it that that goes through? The mortgage officer says that if it 'doesn't work' you lose the money you spent on the drive by; that's okay.
Also--does the bank just 'turn you down' or do they offer a lower amount? I'm pretty happy if they just offer a lower amount.
Based on what you wrote here, I wouldn't worry too much about the drywall. The appraiser can either appraise it "as is", which may lower the value slightly, or "Subject to" which is a value as if the drywall has been fixed. She/he will come out again right before the loan closes to make sure the work was completed.
I agree with your sister that you always want an appraisal that reflects the true value of your house. That way it won't come back and bite you at a later date.
Based on what you described, if I read it correctly, the drywall is pretty much a cosmetic issue. Much depends on the lenders UW Guidelines.
Based on what you wrote here, I wouldn't worry too much about the drywall. The appraiser can either appraise it "as is", which may lower the value slightly, or "Subject to" which is a value as if the drywall has been fixed. She/he will come out again right before the loan closes to make sure the work was completed.
I agree with your sister that you always want an appraisal that reflects the true value of your house. That way it won't come back and bite you at a later date.
Based on what you described, if I read it correctly, the drywall is pretty much a cosmetic issue. Much depends on the lenders UW Guidelines.
Thank you Annemieke. I have some updates if anyone cares to advise me:
The loan officer says the house can't be valued at above what I paid for it, which is 125,000. That means I can still have the 100,000 loan, which is all I want. (It was uninhabitable when I bought it)
The loan officer also talked about 'marketabilty' which means he thinks I should try to get the inside painted before the appraisal, because they'd want to know that it can be marketed. Is this pretty common?
I'm worried. Would the bank have me apply if it doesn't look like I would get the loan? Is there some sort of 'pre-approval' process for a refinance, that lets you know you are likely to get it before you pay for the appraisal? (The appraisal will be 390.00.) Or would they give you some lesser amount (which would be okay)? Or would they just say, forget it, after you paid the fees?
What does the LO mean by that? If the market indicates that your house is worth more than what you paid for it, it is what it is.
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Annnemieke, I only bought it in March 2012, I suppose is why. I hope he is wrong. It was an 'as is' short sale, which the township had judged unhabitable. It isn't so much that the market has gone up, it's that I made the house habitable since then, at some expense.
Huh? Never heard any of this before......home can't appraise for more than what you paid for it? Rubbish.
On a conventional mortgage, the home must be habitable, meet safety and code regulations. The leak must be fixed. After that, it sounds like the work needed is cosmetic, in which case, it should not be a problem. I've also never heard about a rush to paint for maketability. If I were involved in this transaction and there were any questions on the appraisal, after obtaining a licensed plumber's statement repairs were complete, I would request the appraiser comment on the windows and repairs, asking specifically to comment (and only if this were the case) that the remaining work is cosmetic and does not affect the habitability of the home. Chances are, the report would come in this way, subject to a contractor's statement.
I am more concerned about the loan officer's comments that I can't substantiate by anything in the Fannie guidelines (and I checked) and Freddie is far more lenient. We have closed loans on conventional loans where there are holes in drywall, water-stains from old leaks and bare subflooring showing. It sounds like someone is on collateral perfection patrol.
Do you own multilple properties (ie more than 4?) I can't think of any other issue that would limit your ability to cash out and do as you wish.
Thanks, Smart Money. I'm going to tell the loan officer this and ask if he can reconsider!! (I do not own multiple properties, only my house and the one condo.)
ps: update, I found someone to fix my drywall and moldings! I knew I would find a plumber. But carpenters are hard to find. He will have to 'fit me around other, bigger jobs' but should be done in three weeks.
More kids should study carpentry! These people have tons of work.
Huh? Never heard any of this before......home can't appraise for more than what you paid for it? Rubbish.
Can this be due to Loan Seasoning? See post below by CMB00
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