45 days or longer to close an FHA loan?

By
Real Estate Agent with RE/MAX of North Orange County

I closed a deal on a bank owned foreclosure in Anaheim, Orange County California today. It took the lender more than 45 days to close this deal. I was surprised to discover that even after my clients signed the loan docs, it still took two weeks to fund. Should we prepare all FHA buyers for the scrutiny of numerous lender conditions both before and after underwriter approval? Many things we had to send two or three times while waiting for the loan to fund. Have the banks laid-off all the productive workers? Are they really backed up so much that we need to ask for three extensions before closing?

I'm wondering if other first time home buyers are having the same trouble closing FHA deals these days. Do you think the stimulus bill will change any of this?

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www.homerealtymanual.com

 

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Rainer
6,637
John Bressor
Coldwell Banker, Garden State, Century Homes Group - Fair Lawn, NJ
Personal Service with a Difference

Aaron,

I am in the middle of a FHA transaction now. after everything has been done, buyer's home inspection, c/o in place, ready to close in 10 days, etc., FHA decides today that the home's exterior needs to be scrapped and painted because of lead paint possibility. mind you they did their inspection 3 weeks ago and only responded today. they will not release any funds until this is done. the lower part of this home has been painted 3 times in the last 15 years. also, when completed we must call them and they will re-inspect in about 14 days and if everything is ok then we can proceed to closing, about another 10 days. 2/27 closing looks like 3/30 closing, I hope.

Feb 19, 2009 01:39 PM #1
Rainer
33,419
Aaron Kelly
RE/MAX of North Orange County - Anaheim, CA
Realtor - North Orange County

Wow!

Was there any reason for the bank to think there's lead paint in there?

What city?

 

Feb 27, 2009 01:06 PM #2
Anonymous
Ms.Tee

well i'm in the same boat i haven't closed yet either. my closing date was the 12th of feb and it's the 28th. i talked to my real estate agent last night and she said the lender is backed up. and yes i have a fha loan also i already put in my 30 days where i'm at so hopefully it happens soon

Feb 28, 2009 01:58 PM #3
Rainmaker
279,071
Tim Storm
Fairway Independent Mortgage Corporation - Irvine, CA
Orange County FHA and VA Home Loan Specialist

I keep hearing these bad stories about FHA closings, but really, FHA shouldn't be that hard. It sounds like the lender ordered loan doc's without getting all prior to doc conditions taken care of. Or they are so backed up that by the time they reviewed the signed docs items in the file were outdated. Even so, the loan officer should be aware of what items may be expiring (paystubs and bank staements) and make sure the buyers are forwarding the updated items as they receive them. I work for Crestline Funding, which is a Direct FHA lender in Irvine. I've closed FHA loans in 15 days (deals that had fallen out and I stepped in) to 30 days. The only deals that are taking longer are only because the banks selling the properties are causing the delay. Those deals seem to be a "hurry up and then wait" scenarios. But still, I'd rather be waiting for the seller than waiting for the buyers lender.

Regarding the lead paint issue, that is something that most likely was addressed in the appraisal. The loan officer or processor should have reviewed the appraisal to make sure there were no appraisal conditions. (when it first came in, which should have been in the first 7 days of escrow.)When this doesn't happen, the underwriter will eventually catch it, but only when the underwriter finally receives the full package. The reinspection shouldn't take 14 days. The appraisers I use can typically reinspect for any appraisal conditions in 24 hours.

FHA is a great program because of the relative flexibility in credit (FICO's down to 620) and low down payment of only 3.5%. 30 day escrows are easy.

 

Mar 15, 2009 07:06 PM #4
Anonymous
P.W

My husband and I are buying a home right now and already need an extension due to our lender. It is ridiculous. We are more then ready and have provided EVERYTHING in a timely matter and up to date. Re inspection is supposed to be done by 3-27 and it is now 3-25. Things aren't looking good. It sucks because we have done everything right and now the lender and the fha people are about to make us loose the house we really wanted. I ahve done so much work on this and don't want to give up. I even turned the water and gas on myself for this inspection just to make sure it is done properly. Any suggestions would be great. Although we don't have much time left.

Mar 25, 2009 09:35 AM #5
Anonymous
SV

P.W. I feel your pain! My husband and I are in the same situation. Our FHA loan was "supposed" to close on May 29. It's now June 4 and still no word of an approximate closing date. From the moment we opened escrow, we got everything on our end done at lightning speed. The inspection and appraisal were done in 3 days. We had to fix some exposed wiring and numerous lead paint issues that were totally ridiculous, like the paint that was peeling from a door that was about to fall off. The seller did not want to contribute to any of this. Still, we got that done quickly.

A day before the 29th, our lender told us that there was an issue with the appraisal and that the underwriter was up in arms that the basement had been given "no value." Why couldn't this have come up weeks ago??

We were also requested to give a ton of additional documentation - that we had already given them.

We had to ask for an extension from the seller. Luckily, she agreed.

Still waiting . . .

Jun 04, 2009 09:56 AM #6
Rainmaker
279,071
Tim Storm
Fairway Independent Mortgage Corporation - Irvine, CA
Orange County FHA and VA Home Loan Specialist

I just had to come back for another comment after reading the comments from the frustrated buyers above. I'm hearing stories like this everyday but still think it is a matter of how thorough the loan officer is upfront. If the loan officer just requests all the documentation and then hands it off to the loan processor who evenyually  hands it off to an underwriter, who then finally reviews the file, then issues are bound to arise. A few years ago it didn't take much to originate and close a loan. DU (Desktop Underwriter from Fannie Mae) was great for "underwriting" on the fly. DU is still used, but lenders will ask for more information than the automated approval is asking for. Plus, bank statements need to be reviewed for unusual deposits, and credit issues need to be explained. The loan officer needs to act like an underwriter on day 1 of the transaction, and even "over document" the file in order to lower the chances of a "surprise" coming he day for the scheduled close date.

It is definitely challenging right now to close a loan. But I'm still closing FHA loan in 30 days or less. When issues have come up we are far enough ahead of the time line to resolve them without going past the scheduled close date. When shopping for a loan, don't automatically think that going with a big bank is going to make your transaction go smoothly. As a matter of fact, you probably shouldn't think that at all based on the stories I keep hearing. A smaller mortgage bank, Direct lender, can underwrite and fund loans very quickly. Check around and ask lots of questions before choosing which lender to handle your deal.

Jun 24, 2009 05:53 PM #7
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Rainer
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Aaron Kelly

Realtor - North Orange County
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