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Need a lender who'll underwrite loan with cesspool and escrow/hold back for septic.

What lenders will give me a loan on a home in RI with a functioning cesspool and escrow account to replace with a new septic system?  DTI 45%, credit score 748, 10% down on $226k house.  The broker I'm working with is charging me over 2% for loan origination fee.  Seems crazy.
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March 06 2013 - Cumberland Hill
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Hi, my name is Lisa Simmons a mortgage banker with Bank of England.  at 203k streamline will work or the Fannie Mae homestyle or Home Path loan and it does not have to be held back.  It is all taken into account with the value and what is disbursed at closing.

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March 07 2013

Sticking to the parameters you provided I went to work to see what we would be able to do.. The Homestyle loan would have been perfect for you, however the seller has already agreed to pay for the work with a funded escrow holdback. Our guides allow for the LESSER of 10K or 10% of the value to be put into a escrow holdback. So I asked for an EXCEPTION and GOT ONE from way up top ;)
 
It was all based on your high credit score, 10% down payment, you having reserves after closing and the lock being good through competition of the project.

The best part is your org fee will NOT even come close to 1%.  Contact me through my profile and lets close it next month for you.

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March 07 2013
With the strict standards in funding today, I am not surprised. It sounds as though the bank would only do it at a cost of the 2%. That being said, it seems like they are making it harder for a reason. These situations can get way out of hand for a buyer going out on a limb for these kinds of repairs. I would think worst case scenario on something like this because once you close, its' yours. Even with an escrow it could be of a greater risk than the funds held back. Our lenders here won't allow escrows on items like this because of all that can go wrong. It's simply not worth the risk at any profit so they won't do it. Have you tested the water samples to be certain the water is safe? I would do that before moving forward. It may not be required there but it is here. They will not lend without these things being done first. One more thing, you will be closing through an attorney I'm sure. Seek legal counsel so you can fully take in all that you will be taking on after the home has closed. It might not be worth the risk in the long run. Just a thought! Thanks and much luck!
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March 06 2013
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The seller would be putting $22,500 in escrow based on an average $15,000 estimate to replace.  Home has not been appraised yet but I'm told it shouldn't be an issue since the current cesspool is functioning (they're being phased out in RI however). 

I stayed away from the 203 loans due to the longer presumed time to close and I also wonder why the high origination fee, it's actually the only reason I'm considering another lender now.  However, the broker I'm using only found 1 lender out of over 50 that would underwrite a loan with both a cesspool and holdback.
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March 06 2013
I think you are the right track with an Escrowhold back.   Seller funded, buyer funded?   Was it an issue on the appraisal?   Will it be over 5K?  If less then 5K, would be less paper work then a 203K.    Be happy to help with either direction, let me know. 

2%?   I wonder why?
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March 06 2013
Perhaps an FHA 203K would work for you. It is a single-close loan where you can obtain the additional funds for repairs or critical upgrades such as you mentioned.
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March 06 2013
 
Related Questions
Need a lender who'll underwrite loan with cesspool and escrow/hold back for septic.
Profile picture for Lisa Simmons
Latest answer by Lisa Simmons
March 07 2013 | 6 answers
  • Asked by user6004215
  • In Mortgage
  • March 06 2013
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