FHA Mortgage fell through, can I sign a new contract on house for conventional loan?

Posted on Oct 18, 2012 in Unique Loan Programs

Question by Joshua K: Is a FHA 30 yr fixed mortgages interest rate changeable?
I was told by someone that depending on the loan the interest rate can go down but not up on some FHA 30 fixed rate mortgages. Is this true?
I know its fixed and I know what that means but it is a FHA loan. For example I also heard that they can be assumable which standard loans are not. Are they also not assumable? Have I been missinformed here also?

Best answer:

Answer by alterfemego
Not on a fixed rate. If a lower rate is available, approved side effects you need to refinance.

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Question by calshahin06: FHA Mortgage fell through, patient can I sign a new contract on house for conventional loan?
I have been watching a certain house since May 08. House finally went on the market in January 2009. Called about it immediately after seeing the sign in the yard and someone else had a contract on it. The previous owner had let the home go into foreclosure so it was bank owned.

The people with the contract on the house found out while doing a title search that the title was not clear due to some IRS tax issues. I zoomed in for the kill. I didn’t care how long the wait was, visit this site I would wait it out for this house…signed contract in February for 15000 more than they were selling the house for. I was getting an FHA loan and was assured it would pass. Got news it did not pass due to a waterleak in the basement, search realtor went in and fixed the problem but because the house had been vacant for over a year, the water problem had caused a mold issue in the downstairs closet.
I had a health inspector go out at my expense and check the house. Only mold was the mold in the corner of the closet downstairs. could be fixed really easily.
Was informed it would not go FHA cause of my appraiser saw the mold in his prelim appraisal and he would have to note it in the report.
Now that the contract fell through, they have relisted the house for 17000 less than I offered the first time.

My question is, can I sign a second contract on the house and go conventional this time?
the house is only selling for 67000 it is in a nice location and itis 5br 3 ba 2700 sq. ft. no mold anywhere else but in that corner of the closet downstairs
One thing i wanted to add is that the appraiser didn’t do a full appraisal. he just went in and looked very quick…I was told by inspector the only thing that needed to be done is to get a spray can of Kilz and spray paint the closet since the mold is nowhere else in the house.

Best answer:

Answer by Mel
You know you can’t do FHA, but you can do a conventional loan with out an inspection but you can’t go back on the sellers because you are opting out to do the inspection. BUT… your lender (mortgage company) might request a home inspection. There are ways around all of this but first thing is first, if you want this house then you need to get into contract with the Realtor. Then shop around for a mortgage broker. In the end it will depend on the appraisal value, even with the mold. If the lender wants it fixed before the closing then they will ask for the modification (talk to ur lender). Also depends on how much you ae putting down. The more the merrier and you will see more can happen if you are putting your cash on the line. There are so many ways around all of this in conventional loans. Not FHA. If in the end you can’t get the loan passed then you can get out of contract. No fault to you. If you really want this house then a good broker will get you in. Also sounds like a good Realtor.

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6 Comments

  1. Yes you can. Keep in mind though that it is harder to qualify for a conventional loan & requires more down payment- higher credit scores & debt to income ratio’s are lower on conventional. Good luck sounds like a great deal.

    After reading one of the other answers where they said it would not require an inspection… that is not correct- it will require a brand new appraisal, but as long as the mold issue is resolved it will be fine.

  2. Now that the listing agent and selling bank know about the mold they have to disclose it. However, with most people going FHA now, if you offer their new asking price and ask them to remedy the mold they may just do it!! Never hurts to try. An FHA appraisal follows the property for 6 months, it would be in the banks best interest to remedy the problem.

    Good Luck

  3. It’s ok that the appraiser notes it in his report, just make sure he notes so that he has to reinspect after repair is made. Which means, no mold in sight. It’s that simple. Don’t let them tell you different. I’m a FHA appraiser and this is common in foreclosures. Anything that the appraiser found wrong, can be reinspected after repair. It might cost a few extra bucks for appraiser to go back out, but worth it.

  4. Contact the person you talked to at FHA, contact the bank or the seller of the house and talk to them about your change of heart.
    Contact the lender if you know whose lending you the house and ask if you can re-apply for the loan.

    They might charge you for reorigination of the loan you wanted now. Processing fee and closing cost and all that. They might tell you to just refinance so to minimize the processing of papers – you will have to pay for everything as going back to zero. How much ever the house you bought, your fee for rewritten loan or refinancing (no cash out) you have to spend probably 8,000.00. maybe less.

    That’s why, people should not just go ahead with the first instinct of exitement in buying this greatest buy of their life. This is where people
    in this business make their money- from the help of people that constantly looking.

    I would suggest that you stay for now for what you’ve got – refinance later because rate might still go down lower.

  5. If it was just noted in the appraisal and you had it fixed you could have sent the appraiser back out to see that it was fixed and he could have noted that in the appraisal and your lender could have submitted the updated appraisal through underwriting. You probably would had to have shown a receipt for the fix and an invoice of the repair work from a licensed contractor.

  6. Note sure what you mean by the FHA appraiser did not do a full appraisal? Your appraisal would be a full appraisal, “subject to” the condition being repaired. When the condition was repaired the lender would request a HUD compliance inspection and the appraiser would go back out and take photos of the repaired Items noted in his report and fill out the HUD form and send it to the lender. I think the problem is you offered $ 15,000 more than asking price. The appraiser must research the listing and report what he finds in his report. If they see the listing price was $ 67,000 with a DOM of a year and you offer $ 82,000 they are not going to lend you $ $ 82,000 and you killed the deal. What that tells them is no one was willing to pay $ 67,000 for a year, but you are willing to pay $ 82,000, this is sending up red flages to the underwriters, that you are over paying for the property. You also have to remember that if the appraisal came in at $ 67,000 they are not going to lend $ 15K more on the home, just because you are willing to pay that much. You will have the same issues with a conventional loan. By the way the inspector you hired is wrong about the mold, you can cover it up, but it will still be inside the wall and on the studs.