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?
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.
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
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
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.
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!
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.
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