Why does the REO Bank “seller” submit my purchase offer to MI (Mortgage Insurance) for review?

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We have made an offer on a REO single family home in California. The bank has now submitted the offer to MI (Mortgage Insurance) for review. Why would a REO property need to do this?

Our offer is a cash purchase with no loans needed.

Thanks for your answers and information !

My fiance and I were not approved for a mortgage due to my bad credit (thanks to ex-husband). He was pre-approved for a mortgage on his credit and income, but only for 80K (he is 1099, therefore his AGI is much lower). Since I could not be approved, my income cannot be considered for a loan. So, my parents have offered to purchase the home we were looking at (their credit is impeccable) and rent to us on an rto basis until we are able to be approved. The home is an REO and listed at $ 108K. There is about $ 20K in repairs that need to be done before we could move in. The county website appraises the home at $ 158K. Are there loans available for a non first time homebuyer to finance the whole mortgage plus the repairs needed on an investment property? My parents would prefer not to co-sign (they were burned in the past).

  1. Reply
    January 23, 2011 at 9:39 pm

    Because most lenders have over-complicated this process to get comfirmation from 12 ladies dancing, 8 maids a milking, 7 lords a leaping, 1 appraiser, 2 Realtors, and partridge in a pear tree to decide if this is an acceptable contract to enter. And those of us on the front lines wonder why the banks are in trouble, NOT.

  2. Reply
    Ed Atun
    January 23, 2011 at 10:17 pm

    The bank is losing money on this house. They had “insurance” in case they ever lost money. The insurance was MI. They are finding out how much the insurance company is going to pay them before they finalize their response to your offer.

    THis is not happening much since no one used MI during the realty boom years.

  3. Reply
    January 23, 2011 at 10:39 pm

    Did you and you fiance explore the possibility of getting an FHA loan with your mortgage banker/broker? You might call and inquire of the person you tried to get pre-approved through and see if you are qualified for a FHA mortgage. FHA has a loan that might pay for a few cosmetic repairs on a real estate purchase.

    If your parents purchase the home for you guys, why don’t you sign a contract of purchase with them for the purchase price of the home. You can then reopen escrow and and title to transfer the property into you and your finance’s name with you being responsible for the fire (hazard) insurance, county taxes as well as the mortgage payments each month.

    Your contract would indicate the purchase amount, any interest rate, the amount of any late fees they would charge, how many months the mortgage would be for (10,20 or 30 years).

    Their name would appear on the title as the lender as well as on the insurance as the Loss Payee (Your escrow closing agent will understand this term and ask the insurance company to place your parents on the insurance policy as such.

    Once you have paid the payments either directly to the mortgage company or to your parents for 12-24 months you may then simply refinance the mortgage into you and your finance’s name.

    Make sure that you use a personal checking account with you and your finance’s name on the checking account.

    Your parents are protected because if you and your finance fail to make the monthly mortgage payment they have the option of foreclosing on their daughter.

    I hope this has been of some use to you, good luck.

    “FIGHT ON”

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