Buyers changing financing AFTER contract signed and Inspection & Appraisal done (5%, new agent)

[rjrcm]

Originally Posted by JackandJill76

I......after the financing application and commitment paragraph there *should* be an alternate financing paragraph that explains the buyers' rights. See anything like that?

Just as an example of contract differences, we in AZ do not have an "alternate financing paragraph". Loan terms are described in an attached pre-qualification and subsequent loan status update form. If the buyer can't get a loan on those terms, then the buyer can cancel if within the loan contingency period or forfeit earnest money if not. Or they can negotiate with the seller for an addendum that changes the terms.

[miakelly]

I don't see anything about alternative financing, I read it and had my husband read it.
Also, as far as I am being told, they are able to get a conventional loan and are able to put 35% down, but are electing to switch to an FHA loan to get a better rate and also to only put 20% down. I guess they decided they don't want to put as much down.

I could care less how they get their money, but since we already had their original lender appraise our home and they had a full home inspection and everything was good, I am hoping they are obligated to abide by the original inspection and appraisal. I don't want to have to deal with an FHA inspector ( and don't feel we should have to pay since the buyer chose to voluntarily switch lenders) and I feel the same way about the appraisal. Why should we have to take a chance that the appraisal comes in lower, simply because the buyer decided to switch lenders after the contract was signed and the appraisal contingency was removed?

As long as they pay the agreed to price and don't as us to pay for anything else, they can get any loan they want, my biggest concern is that they will try to re-negotiate the price if the next appraisal is lower, or try to get us to do repairs if the fha inspector finds anything.

[JackandJill76]

It seems like all you can do at this point is talk with your agent and discuss what your options are. If there was not an alternate financing clause and their new financing results in a new lower appraisal/purchase price that everyone had previously agreed upon you *may* be within your rights to terminate the contract since you did not sign off on any addendum agreeing to the change. Again, since we don't know your state and contract specifics it's hard to know what those rights are. Talk to your agent asap....

Remember for the repairs, if there are any, you DO NOT have to pay for them. You have the right to refuse to do that and the buyers would be responsible for anything FHA requests to fix. You already satisfied the problems found in the home inspection and the buyers signed off on that.

[SmartMoney]

There's a couple (well several) things that just don't add up here......the first being why would they go FHA with 20% down? Even w/ 20% down, they are going to have to pay MIP.

What is your agent saying? How many days do they have to provide loan approval in your contract?

An FHA appraisal cannot be dated before the case number is issued. When a lender wants to order an appraisal, they first must obtain a case number from the FHA system. Then the order can go out to the appraiser w/ that number. The two evaluations (FHA vs. Conventional) for value don't differ much, but the physical inspection of the property does differ and the inspection must be after the case number is issued. (We aren't talking about extensive inspections, just like, does the hot water work? toilets flush? Shower drain? and my personal favorite, are there at least 18 inches in the crawl space?.

One of two things have happended with the buyers, or both. Cash to close is the first obvious alteration, from 35% to 20%, but the ONLY reason to go to FHA is for qualifying ratios. (Okay, credit scores are another reason). The rate may be lower FHA, but with the MIP, the payment will be higher, negating any benefit.

Your gut is right to be suspicious, something's not quite right, but that doesn't mean they won't get the loan. Check your contract to see how any days they have to deliver loan approval.

[chicagojlo]

The reason they probably changed is that the original lender was feeding them a line about being foreign nationals and needing a specialised lender (and charging them a ridiculous rate for it, hence the larger DP), if they've been here 15 years that's garbage. Now someone has told them about FHA and instead of actually doing their homework they're jumping into that instead. I'd be wary of just how clueless these people are.

[miakelly]

Originally Posted by SmartMoney

There's a couple (well several) things that just don't add up here......the first being why would they go FHA with 20% down? Even w/ 20% down, they are going to have to pay MIP.

What is your agent saying? How many days do they have to provide loan approval in your contract?

An FHA appraisal cannot be dated before the case number is issued. When a lender wants to order an appraisal, they first must obtain a case number from the FHA system. Then the order can go out to the appraiser w/ that number. The two evaluations (FHA vs. Conventional) for value don't differ much, but the physical inspection of the property does differ and the inspection must be after the case number is issued. (We aren't talking about extensive inspections, just like, does the hot water work? toilets flush? Shower drain? and my personal favorite, are there at least 18 inches in the crawl space?.

One of two things have happended with the buyers, or both. Cash to close is the first obvious alteration, from 35% to 20%, but the ONLY reason to go to FHA is for qualifying ratios. (Okay, credit scores are another reason). The rate may be lower FHA, but with the MIP, the payment will be higher, negating any benefit.

Your gut is right to be suspicious, something's not quite right, but that doesn't mean they won't get the loan. Check your contract to see how any days they have to deliver loan approval.

Forgive me if this is already clear, but the first appraisal and home inspection were done with the original lender, that was to provide conventional loan with 35% down. All was good with insp & appr.

My agent is telling me, that the buyer agent is telling here "they are trying to save money by getting a lower interest rate loan and they would prefer to put less down (20% vs 35%) to hang on to more of their money".

I am not taking this lightly, I was on a conference call with my agent and her broker yesterday for quite a while listing all of my concerns. It just doesn't add up to me, but I am not a broker, so I am not sure what to make of it.

On the one hand, they may feel they are saving money somehow. I don't know, maybe the are going to invest the 15% that they aren't putting down now and feel investing it into something is better than putting it into the equity of the home. I have no idea what they are thinking and of course, their agent isn't going to give us too much info.


Contract says they have 55 days to provide a Written Loan Committment.
Also says "Buyer will make mortgage loan application for the financing within 5 days after effective date" .

Effective date of contract was 4/6/11. This was the date we all signed the addendum agreeing to the final price. Important to note addendum specifically says Appraisal and Inspection to be done, and contingency removed by 4-8-11 - and they met this deadline and removed contingencies.

Thanks to all that helped. Any other ideas based on what I just wrote?
Thank you all a million times, this is really helpful and appreciated

[chicagojlo]

I don't know what your house is listed at, but for most people 15% is probably a lot of money. I don't know a lot of people who would be comfortable sinking that into their home given the state of the market these days. As I said before their 'specialised lender' was probably charging them an exorbitant rate, perhaps they were getting the other 15% from family in order to keep their monthly cost down. It makes sense to me as a cautious buyer, although I would have done all this homework before making offers and signing contracts.

[miakelly]

Originally Posted by chicagojlo

I don't know what your house is listed at, but for most people 15% is probably a lot of money. I don't know a lot of people who would be comfortable sinking that into their home given the state of the market these days. As I said before their 'specialised lender' was probably charging them an exorbitant rate, perhaps they were getting the other 15% from family in order to keep their monthly cost down. It makes sense to me as a cautious buyer, although I would have done all this homework before making offers and signing contracts.

Yup - that makes sense! Thanks

[nzone]

miakelly, you have executed a "P&S" without an attorney? Where is your attorney? You should seek his/her advice...that's what you pay him/her to do, right? Changing lender and the percent down payment would trigger a change in "P&S" agreement (wordings). The seller's attorney needs to change the p&s (add addendum or rider) and you need to agree. Then the buyer's attorney either agrees to it or requests a change. Goes back and forth until all parties agreed.

[rjrcm]

Originally Posted by nzone

miakelly, you have executed a "P&S" without an attorney? Where is your attorney? You should seek his/her advice...that's what you pay him/her to do, right? Changing lender and the percent down payment would trigger a change in "P&S" agreement (wordings). The seller's attorney needs to change the p&s (add addendum or rider) and you need to agree. Then the buyer's attorney either agrees to it or requests a change. Goes back and forth until all parties agreed.

If the OP is buying in Florida where their profile says they are, then they don't use attorneys there to write home purchase contracts. Lots of states don't. Best to work the issue with their agent.