Question we received: “I was offered a no-fee loan by Bank of America. The promised interest rate was 5.2% for a 30 year fixed, with 5% down. I was approved based on my great credit. The entire process was complete except underwriting. The underwriter claims that because the property is a log home that it is not qualified for a no fee mortgage! However, it is qualified for a loan with higher interest rate.
My question is does that sound right to you? I’ve asked other loan officers and they have never heard of anything like it before.”
Answer: The team at LenderRateMatch has scrutinizes pages and pages of loan guidelines every day to make sure our loan searches remain as accurate and up to date as possible. (Makes my head spin, but thankfully they’re great at it!) As you point out with your question, it’s those little details that make or break a deal.
So I posed your question to them, and here is what they had to say:
“Log homes, unless they are in a vacation area with lots of log homes, are considered a higher risk factor for the lender. First, there may be no “comps” (comparable properties for an appraisal) and second, reselling the property if it is foreclosed upon can be a problem. Many lenders don’t even write these types of loans. Our suggestion is this, regardless of whether the property IS or IS NOT in a vacation area, go to a lender in a vacation area that is familiar with this type of property for your loan. Make sure the loan officer actually does log home loans, don’t let one just tell you not to worry about it.”
And I’ll add my 2 cents — always compare a no-fee loan with one at par rate using the FreeRateSearch.com home loan search engine. No-fee loans are made at an interest rate that is high enough to roll the fees into the loan. Depending on how long you’ll be paying on the loan, you may be better off with a lower rate loan that also carries closing costs. And if cash is the issue, see if you can’t get the seller to contribute to closing costs or an interest rate buydown. It is a buyer’s market!
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