FHA 203B With Repair Escrow
by Larry Keen
Jeff, my name is Larry. I am the senior loan officer at Colonial National mortgage. I work out of the Denver office. I'm having an issue with a purchase that I am trying to do.
It's a bank owned property that needs minor repairs.
My underwriting department is telling me that you cannot escrow unless the repairs are weather related.
It is bank owned so the bank will not do the repairs and of course they will not let the buyer do the repairs prior to closing.
My approval requires the repairs to be done before closing. So it is a "catch 22".
When I pull up the FHA guidelines it seems to support the view of my underwriters. Is there some written documentation that says these minor repairs on a 203B loan can be escrowed for a bank owned property or is it that some lenders are a little more lenient on the FHA guidelines.
You seem like a good guy Jeff and was hoping that you might help me with my argument. Obviously someone is doing 203B's with escrows for minor repairs!! I look forward to hearing from you!
Sr Loan Officer
Colonial National Mortgage
Thanks for coming by and visiting my site and asking such a great question. It's funny, I see you are from Denver Colorado. As I'm writing this answer to you, I'm sitting in the Westin Hotel in downtown Denver. Been here on business for the last few days. This is a beautiful place, it must be hard to get any work done just looking at the natural beauty of the mountains and all.
First of all, I want you to know that I'm no longer in the mortgage business myself. I now consult small businesses on sales and marketing. This website was put up over 6 years ago to market my mortgage business. So I do not have the same type of inside information that a loan officer may have.
However, with that said, I do know my way around in the Hud.gov website and went there for you in search of some information. I think I may have found something of interest for you.
When I was in the mortgage business, I did FHA loans and established repair escrows at the closing. So I know this can be done.
According to the HUD website, the form HUD-92464, Request for Approval of Advance of Escrow Funds is what you need. Search for the form number at the website and it will show up for you.
In short, this form is designed to open up an escrow account for "non critical repairs" and from what I can see, certainly should allow for the buyer and seller to agree along with the lender to get the job done.
There is some work to getting this together, like estimates, time frames and so forth, but it does allow for the lender to set money aside for these repairs to be done after closing.
I remember it well when I was in the mortgage business how hard it was sometimes to get the deal done. The better you know the FHA guidelines yourself, the better off you will be.
I suspect you work for a mortgage broker. Try to get this deal into the hands of a large national bank like Flagstar, Wells Fargo or Chase. At least they have strong underwriters who know the FHA guidelines inside and out.
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