HUD requiring buyer to choose lender?

Question

I am in the process of trying to buy a HUD home, and my contract was ratified last Tuesday. I just found out that we have to do a 203K loan yesterday, after finally hearing back from HUD and the listing agent. Now, my buyers agent says I have to have my lender chosen by Friday. They say it is a 10 day deadline. The problem is I don't yet have the bids yet for the 203K, so I haven't been able to choose a lender yet, since no one wants to run even preliminary numbers without the bids. Has anyone heard of this deadline? Does it have to be a completely final choice? Any imput would be appreciated.

Wayne Brooks · Answer

This is a "non problem" to me.  First, you need to be preapproved for an amount so you know you qualify for a loan for the purchase price and estimated repairs.  A 203k lender starts the actual loan process Before you get your bids, as you have to use an approved contractor anyway, it's a waste of time getting quotes from contractors who can't be approved, or are not willing to work under the 203k program process.  Sounds like you're talking to the wrong lenders.

Greg H. · Answer

@Salley Smith

So I am understanding correctly, you are doing an amendment with HUD to change the contract to 203K financing from FHA ?  While they will give you the change they will not extend the 45 days for closing to 60 days.  It will be very difficult to close a 203K in less than 45 days so you will have the option at your cost to extend with 2 15 day extensions at your cost.  203K is a very difficult loan product.  If you decide to proceed, make sure your lender has experience doing a 203K on a HUD home

To your other question, as long as you have a lender letter stating the terms, that will be good enough for HUD.

Salley Smith · Answer

Yes, HUD did show it as an IE property with a certain amount in repairs, however there number was completely incorrect according to the last inspection done. Additionally, there was an additional leak they were unaware of.  We are guessing the house will need an extra 10,000- 15,000 dollars in repairs in addition to what HUD stated on the website, depending on inspection. Unfortunately, no lenders want to give me bids until then.

Lisa Kohl · Answer

@Salley Smith It depends on what type of 203k the property is eligible for. If it's insurable with escrow then HUD will set aside the designated amount for the repairs noted on the property report. So if that's the case then you already know the amounts for repairs.