Confused about my FHA appraisal.... (documents, mortgage, mortgage, banks)
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Long time reader first time poster! I hope you wonderful people can help me.
So I just got the results of my appraisal and I am confused as to if I need to make repairs before closing or not. Its an REO house so they are not going to do any repairs.
The appraiser said there was some floor trim missing in the dining room and living room. He gave a cost to cure at $600. However it does not say it must be fixed, no where on the form does it say it must be fixed.
"C4;Kitchen-updated-less than one year aQo;Bathrooms-updated-less than one year aQo;Some recent updates included new vinyl floorinQ in the Kitchen, dininQ area and Bathrooms, new carpetinQ in the livinQ room, bedrooms and recreational room, new central air conditioninQ unit and some new interior paint. Some trim work was missinQ on the date of inspection as shown in attached photos. The estimated cost to cure the missinQ trim work would be approximately $600. No functional or external inadequacies were apparent on the date of the inspection. "
"Are there physical deficiencies or adverse conditions that affect the livability, soundness, or structural integity of the property? No is checked. "
This is stated in his comments
"The subject meets all FHA/HUD minimum Guidelines as outlined by Handbooks 4150.2 and 4905.1, and all applicable Mortgage Letters"
At the end of one of the pages it has checked "as is" and nothing else. Does that mean it was rejected by FHA for that issue?
Depends on Underwriter Interpretation. Stricter banks will say "fix the trim, and get the appraiser to go back out there (trip fee) and take pics, and remove the cost to cure from the report.
I recently had to force a client to repair the interior window of a double-pane window because the underwriter could not conclusively determine that the outer was intact. Headache.
However, the truth is that cosmetic items such as this should be passable. The problem is that the appraiser didn't just include pics, but notated an actual cost to cure, which is a wrench to lenders.
Your LO should be selling this as a cosmetic issue to the underwriter and using actual guidelines instead of word-of-mouth.
The big question: Is the appraised value at or above the price, even with the $600 hit?
Even with the 600 its worth more than I am paying for it. I am just concerned because its not cut and dry. The LO e-mailed me last night and said it had to be fixed "she thought".
Your appraisal was done " as is ". There are thus no repairs required by FHA
The cost to cure for the trim. etc. is a guesstimate required to be put there by the appraiser.
There are cosmetic issues with houses which do not affect their livability and are not required to be repaired by FHA. However, the appraiser has to note them and put in a dollar amount to cure.
The only required repairs are those which affect FHA minimum property standards. Your home has none according to the appraiser.
Your appraiser has stated that the property meets minimum HUD/FHA standards and did the appraisal
" as is". You're good to go.
An overlay is a lender stipulation or requirement that is above and beyond the HUD/FHA requirement.
The home has to meet minimum FHA requirements as far as the appraisal, the applicants finances, etc. are concerned. The lender cannot go below those requirements. However, they can go beyond them.
FHA does not require the repair of cosmetic issues. Some lenders will ask for those repairs anyway and refuse to close unless it is done.
I'll give you some examples. FHA permits an escrow for exterior painting between November 15th and April 15th in the northern areas of the country. What idiot would paint in 20 degree weather- right ? Some lenders refuse to abide by that regulation and insist that the painting be done anyway because they don't want to do the escrow.
FHA has no minimum credit score to apply for loan. However, lenders impose their own credit requirements before they will write a loan.
And yes, they can do these things.
I would find it unusual that a lender would worry about missing trim but I guess you never know until you hear back from the lender.
Thanks for the update. I'm hoping to hear back on Monday. I'll post what they say when I hear. I'm going to try and relax and not stress about this stuff this weekend.
This is one of the problems that occurs when the lending industry decided that it was supposed to be a good idea to supply the borrower with a copy of the appraisal. The intended user of the appraisal is the lender and the appraisal isn't written with the borrower in mind- so some things might be confusing to a borrower. It would no different than if the underwriter were to supply you with other documents that they use but aren't required to give to you.
It's even worse now with the UAD requirements because appraisals are much harder to understand.
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