Is Old Man Winter Holding Up Your FHA Closing?

by Keith Landis on December 27, 2010

FHA appraisal policies have always dictated that certain exterior repairs (peeling paint, faulty handrails, broken porch step, etc) be completed before the mortgage can close.  Sometimes completing some of these minor repairs can be near impossible if the weather will not cooperate. 

Peeling or chipped paint is a common FHA exterior repair.  When the appraiser notes the need for scraping and painting, what do you do when it is 10 degrees outside?  

Pressure washing a deck to remove chipped paint when it is below freezing may result in you turning your deck into an ice rink.  This might serve you well if you want to lace up the skates and practice your slap shot but it won’t get you any closer to the closing table.  Even if you are able to get all the old paint scraped off, repainting during these frigid temperatures will result in a poor paint job as the paint will not set properly. 

You may be thinking you are out of luck and will need to wait for warmer temperatures and more cooperation from Mother Nature.  As time passes, rates may go higher, your rate lock may expire and your appraisal may expire.  Appraisal have a shelf life of 120 days.  Wait too long and you will end up forking over another appraisal fee.

A better solution is too work with a lender that offers an Escrow Holdback.  An escrow holdback will reserve an amount of money needed to make these exterior repairs when the weather warms up.  The amount set aside is determined from the borrower obtaining two contractor bids and then the lender holding 1.5 times the highest bid in an escrow account.  This results in a “win win” for lender and borrower alike.  The lender has some financial assurance that the work will be completed and the borrower gets to close immediately and preserve their interest rate and approval. 

                Stop! 

                Wait! 

 I don’t need a contractor to paint my deck, I can do that myself.  In fact, I have been meaning to get to it myself! 

That is fine, you can still do the work yourself.  The lender just cares that it gets done.  The appraiser will visit the home upon completion, sign off on the work and the funds will be released from escrow for the full amount.

The escrow holdback does have some rules and is not for any interior repairs or exterior repairs that are deemed necessary to make the home habitable.  Foundation and structural repairs do not qualify for escrow holdback.  The limit on bids for these repairs is $5000 and the repairs must be completed by June 1st.  

 

This program is great way to avoid having to rush to get an exterior paint or refininshing job done in the middle of winter.  This program allows you to take your time and get the job done right.  Before your FHA closing gets held up by Old Man Winter, ask your lender if an escrow holdback fits your situation.

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