Replies to This Discussion

Permalink Reply by Mike Horton on December 24, 2010 at 5:09am

According to a FAQ that I have from FHA web site, HUD will not allow any buyer closing costs if it is a conventional loan and only 1% if the buyer is obtaining FHA financing. Also, the property canot be bid up to cover seller concessions. They have this in BIG BOLD letters. There is an incentive that is provided to the seller providing they have been pre-approved by HUD for the short sale and they come under contract and close within a 90 day period of $1000 that could be applied to the buyer incentive. So under the best conditions you could have 1% + $1000. Otherwide it is a no go.

Permalink Reply by Michael Schneider on January 28, 2011 at 4:54am

Deb,

I think you would need to ask the Servicer to submit a variance on your behalf.  I have had reasonable variance requests approved by FHA, but have never tried this one.

I think you would need a compelling reason, some special circumstances, and almost certainly net proceeds well above the required net.

Not sure if it will work, but if I needed this to make the deal work, I'd try it.

If you do, can you let us know if it worked?

Permalink Reply by Bryant Tutas on January 28, 2011 at 8:32am

Hi Deb. 1% is the max contribution on a FHA PFS and only of the buyer is using FHA to purchase. You can however request a variance assuming the net to FHA is high enough and meets or exceeds the figure on the HUD 90045

Permalink Reply by Margaret C. Taylor on February 5, 2011 at 3:16pm

Mike I thought the Seller could not contribute anything to the Buyer's side. So would he be able to contribute this $1000.  Margaret C.

Permalink Reply by Bryant Tutas on February 6, 2011 at 1:48am

Margaret, If it's a FHA PFS sale and the buyer is also getting a FHA mortgage then they can get 1% in closing costs assistance. If the buyer is NOT using a FHA mortgage then they get nothing.  You can however ask for a variance.

Margaret C. Taylor said:

Mike I thought the Seller could not contribute anything to the Buyer's side. So would he be able to contribute this $1000.  Margaret C.

Permalink Reply by Richard Huffman on February 28, 2011 at 1:34pm

First time posting and running into this issue myself.

I have seen what appears to be alot of misinformation being given out all over.

I am attempting to purchase a short sale home through BofA. The BPO was done and this was supposedly a bank approved short sale. I offered the full purchase price of the BPO and requested the seller (bank) pay closing fees(approx 5%). Within a week, I received a denial from Bank of America on the grounds that HUD will only allow them to pay 1% of closing costs. The bank supplied my agent some documentation and my agent seemed surprised by this (apparently unaware of this new stipulation) and asked if we wanted to move forward and be responsible for the additional closing costs. We reluctantly said yes. Upset with my agent for recommending something we couldn't do(asking for full closing costs), I began researching this myself.

Mortgagee Letter 2008-43 outlines the Pre-Foreclosure Short Sale program which does say, if the seller is an FHA insured loan, and the new buyer is using an FHA loan, then the seller(bank) can only pay 1% of the closing costs.

 

However, keep some of these things in mind.....the banks are trying to use this to their advantage and get out of paying anymore. After 30 mins on the phone with both FHA and HUD, if the sale is just a traditional short sale and or the seller is no longer in the program than the traditional rules apply allowing the bank to contribute up to 6% of the purchase price towards closing costs. The seller can only be in the program for 4 months. 6 if there is a contract prior to the 4 month expiration.

 

Now keep in mind that there is still nothing requiring the bank to contribute toward closing costs, just don't let them use the new PFS closing cost rule as an excuse to only offer 1%.

 

Rich

 

 

Permalink Reply by Jo Soss on March 16, 2011 at 4:37am

In this situation right now.  The buyer requested 1900 more than the 1%.  I did send an email to the BofA  short sale specialists we were assigned to and ask for her input.  This was the reply ----

 

We can submit a variance to hud for approval for closing cost now the max is 4% if it is not fha buyers.

 

I am a little confused by the response and have sent an email for clarification.  My question to anyone is "what is the variance process, how long does it take?" 

 

TIA

 

Permalink Reply by Michael Schneider on March 16, 2011 at 4:55am

This is an interesting reply.

FHA will approve up to 4% for non-FHA financed buyers?  This is new, I think.

Regarding the "variance" process, you send the request to the Servicer, they must request the variance (meaning, exception) on your behalf from the FHA.

The process can be fast, I have had FHA variances approved in five days.

Go for it, Jo.  Send in the request, with justification and preliminary HUD.

Verify whether the estimated net-proceeds exceeds the "84/86/88% of appraised value" requirement.  If not, request the variance for this also.

Permalink Reply by Jo Soss on March 16, 2011 at 5:07am

Michael,

Our net proceeds does exceed the 88% we are required by about $3,000.  BofA said it could take up to 14 days - not bad I bet. 

So I guess this whole 1% rule doesn't mean much if you can process the transaction.  Now we will be fighting over the taking of other offers in the mean time.

Thank you very much!

 

Permalink Reply by Michael Schneider on March 16, 2011 at 5:31am

BTW, are you sure you need to be at 88%?  Often, the Servicer writes the ATP at 88%, even though that % goes down over the first two months.

The reason I ask is that if you are well above the required minimum net, I think you stand a better change of getting the variance approved.

Permalink Reply by Jo Soss on March 16, 2011 at 5:43am

We just received our approval and it was at the 88%.The letter to participate actually gave us the figure.  :)

Permalink Reply by Jo Soss on March 18, 2011 at 4:43am

Darrell, Thank you for your response.  The buyers are asking for a 3% concession, they are FHA buyers and we will have about $1,000 in excess of our 88%.  I will be submitting the package to BofA to request the variance as soon as I can get an est HUD1 from the closing agent.  Again, I thank you for your clarifications!

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