I have made an offer on a house and the seller (CitiMortage) requested that I prequalify with a specific mortgage company. I did and I applied for an FHA 203b and the seller countered by requesting that I obtain a conventional prequal with the same mortgage company. What possible reason(s)will a seller dictate the type of loan that a buyer has to get to buy their property?
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As I think about your question, and if I understand this correctly, your seller is a bank and you are attempting to purchase a foreclosure property. If Citibank owns this property and they have designated a certain lender, is it one their own companies?
I really cannot see why they would care where the money comes from as long as you qualify for the loan. That seems strange to me.
Now the fact that they ask you to get a conventional loan rather than an FHA 203b, the only reason I can see they do not want you using an FHA home loan is this: The house may not meet FHA guidelines for a mortgage.
So you may need to have the house inspected and find out what may be wrong with it. The seller may know something you do not.
Ask for a sellers disclosure statement if they have not already provided one.
I would be careful here, be sure you know what you are buying. An FHA mortgage is better for the lender since it insurances them against default. But some sellers do not like the FHA mortgage because it requires the house be in good shape and qualify for the program.