Expert: Todd C. Menard - 8/16/2008

Question
Hi.  This is the first home we are buying, and I have a few questions and you might know some inside tips.  :)

We are currently pre-approved for an FHA loan, 3% down payment, no closing costs.  It is a rural loan because of the area we are in.  Also the people giving us the loan are also the people we are buying the home from.  

But it seems like the loan people we are working with are only telling us things one piece at a time.  It started with your pre-approved, we'll get you in to sign the paperwork, this should be a quick deal so you can move in.

But then we had to come up with our last 2 pay stubs.  And then they told us the money for the down payment had to be "aged in an account" with a paper trail for 2 months.

Is there anything else we should know that will be needed before we can get the ball rolling.   I'd rather get all my paperwork together now, than do it one at a time.

I asked the person doing our paperwork, and he said don't worry about it till our meeting monday.  But this "quick deal" seems like its going to take forever to even get started.

I'd rather be over pre-pared than under.  So what do you suggest I have on hand that they might need?  


Also, since this will be our first time buying, what are good questions to ask to make sure we have a good understanding of our loan?  Or anything we should ask about the home that they might not mention up front?  

Any advice would be appreciated.  With the economy being like it is, I want to make sure we don't get ourselves into any type of bad situation.  

Thank you!

Answer
Hello Christina - I apologize for the delay in my reply. I would not have recommended using the seller as your loan originator. Depending on your contract terms and whether there is a finance contingency can depend your obligations under the finance clause and whether your earnest money is at risk if 'they' (the seller/Loan orig.) cant provide you with an acceptance letter without stipulations. Just an FYI regarding your situation. You should have received a list of documentation you needed to provide your loan orig (LO) from him/her in the very beginning. The documentation is consistent with all 'full document' loans. Typically there is: 2 complete bank statements, 2 most recent pay stubs, 2 years tax returns (self-employed is more detailed), proof that your rent was paid on-time for the previous 13 months (from property management co), any statements necessary to off-set any derogatory credit report issues. It is required to show the down payment funds are 'seasoned' or in your account for at least 2 months and occasionally an underwriter may request where the funds came from as well. THE BIG QUESTION is in regard to the recent passing of HB 3221 in the legislature. ALL FHA 3% down loans that do not CLOSE and FUND by August 31st 2008 will not be honored. The new program increases the down payment on fundings September 1st and thereafter to 3.5% down payment. So you may experience a change in the loan program if the lender does not fund the loan by the 31st. FHA loans require significant disclosures that you will sign at the closing table to provide you with an understanding of your loan. Of course, in your case, the seller is your LO therefore you may need to be certain you receive the documents the day before you have to sign and review them yourself first, making notes on any item that your do not FULLY understand. Then ask the LO to provide you with an understanding... DON'T SIGN UNTIL YOU UNDERSTAND WHAT YOU ARE SIGNING!!!!!!!  If it is in AZ ask for a seller property disclosure statement itemizing improvements and repairs they made to the premises while they owned the home (structural, roof, plumbing (Type.. copper/polybutyle, etc), electrical, sewer/septic, tax issues, city bonds/impact fees that run with the property, pests (scorpions/pigeons/bees/roof rats/etc), termites, environmental issues (power lines/toxicity/odors/noise), ask for a buyer advisory document which will advise you about external and surrounding issues such as crime, schools reports, sex offenders, etc,. Knock on the neighbors door and ask the neighbors about the house you are buying, the neighborhood, etc. These are the reasons why and experienced member of the National Assoc. of REALTORS is preferred by buyers. I hope this helped to expand the context of what to consider.. but please remember this is not a complete list and there are other items that may require attention. This is the purpose of the  inspection period and your due diligence. I hope this helps. - Todd