All Forum Posts by: Coco Poyet

@Paul Welden This is great advice. One of the two contractors that we are using is already telling us that the timeline changed since we've been in discussion for a few months now, but that should still work. 

To continue the lender saga, after last week's imbroglio, we have examined further all the loan estimates and CD. As a reminder, we're talking about a primary residence in NY, 15-y fixed, conventional Homestyle loan (reno needed to finish the house) and we have a good credit & file:

1) We received a first "fee transaction worksheet" early Feb with a rate at 2.625% (APR 2.762%) that was for a second home

2) Rectifying the details, we got the first estimate late Feb which had rates at 2.875% (APR 3.037%)

3) Then we received the corrected CD last week (~04/30) which had rates at 3.25% (APR 3.47%). That's a 20%+ increase compared to the initial rate given or a difference of ~$13K over 15 year.

I know that interest rates have fluctuated recently (here) and based on the graph, our latest CD in 3) should be lower than 2) but higher than 1). How have you negotiated rates in the past? Have you seen such changes in recent transactions?

Also, we received last Friday an estimate from another reno lender over 30-y fixed that is at 3.35% (APR 3.46%), unfortunately not enticing being that we are so advanced with the other lender. But something does not seems right since the 30-y rate is very close to what we are offered now for a 15-y loan. What do you think?

At that point, I am also starting to doubt the necessity of a reno loan which was pushed hard by the agents. We're talking about finishing the flooring and trimming in 4 rooms, and changing several windows that are broken. The entire reno is about $26K. Of note, the appraiser report did not even mention the trimming in his report... Any thoughts?

@Paul Welden Thank you for all your help on this. The lender agreed that they made a mistake and they are updating. They almost all made me think I was mad. Again, very much appreciated.

Thanks @David Dachtera.  Yes, always happy to add to my education, what do you have in mind? (i already have most of the BP books + RDPD) And real life experience is also good as I started to doubt myself as all the supposed experts were saying something different. 

I finally got the lender to review the disclosure. And I'm going to try to find a competitor to ensure there's not any additional items i've missed. Good lord.

@Paul Welden In NY (upstate).

@Paul Welden The purchase binder is of $261k. I raised your reasoning to the group: my agent, the lender, the attorney and they are not moving from an inch. My agent even came back with reinforcing the fact that the sale price should be the ARV and that the lender was right. Is there any legal document/ paper that states otherwise as per what you were saying aka for homestyle loan the reno should not be included in the sale price?

We received the initial loan disclosure that states the erroneous amount as the sale price this morning. So again, any help welcome. 

Thanks @Paul Welden and @Loyd Tomlinson. Extremely appreciated. Is there any text that I could quote? I'm looking through the selling guides but can't find it.

@Paul WeldenWe're doing Fannie Mae Homestyle. 

@Account Closed By default I thought it was capitalism but actually we filled the form is "Fannie Mae Form 1003". 

The appraiser did appraise at 287K, does that give the lender the ability to use the sale price as the ARV?

And using the image, where I am still dubious is the sell price in K should not include the adjustment of the reno in K-05 since K-01 is the ARV and includes the reno. What do you think?

Thanks @Paul Welden. It's actually a fixed rate conventional 15-year loan. Attaching the summaries of transaction based on the number I gave here: 261K purchase price, 26k reno, 20% down and 10k deposit (it's not the actual numbers). Again the adjustment "rehab escrow" does not seem right since already included in the sale price of the property. How do you read this?

Thanks all for your input. 

Mike, agreed on the concept that the sale price can arbitrarily be increased to the future value of the property i.e. estimated value of the property after reno. Basically, the lender is OK to take the risk on the future value and pushes the prices up. Capitalism... yes, but how can I negotiate then to lower it to the initial purchase price even though it's not in the lender's interest? Also, (and that covers Matthew's comment) I must use the money allocated to the reno as I signed and provided contracts with the contractors I am planning to use. In what cases with a regular lender would there be more leeway? Because if that was only on my husband and I, we would have done the reno ourselves but were told that it was not possible since not certified contractors (basically putting flooring + trimming in 3 bedrooms + 1 wall of log siding outside)

But, I have still a very hard time to understand the total due by the borrowers. That really does not sound right that it would be value of the property (ie already include the reno) + closing costs + reno. I'm trying to go through the document over and over again to see if i'm missing a tiny note but does not seem to be the case.

Thanks Wayne. Is it common for reno loan to consider that the sale price is purchase price + reno?