Bank denying loan after “subject-to” appraisal: What to do?
I'm not sure about your first two options.  But given your situation, a variant of option three seems possible.   That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs.   You also don't have your liquid money tied up long term.  You just need to float it for a month or two while the repairs are being done.  The bank should be able to preapprove you for the loan.   Note that you might be better off without the loan.  You'll have to pay interest on the loan and there's extra red tape.   I'd just prefer not to tie up so much money in this property.   I don't understand this.  With a loan, you are even more tied up.  Anything you do, you have to work with the bank.  Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it.  With the loan, the bank makes the profit.  If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan.  In general, the interest rate on the loan will be higher than the return on the cash equivalent.   A fourth option would be to pay the $15k up front as earnest money.  The seller does the repairs through your chosen contractor.  You pay the remaining $12.5k for the downpayment and buy the house with the loan.  This is a more complicated purchase contract though, so cash might be a better option.   You can easily evaluate the difficulty of the second option.  Call a different bank and ask.  If you explain the situation, they'll let you know if they can use the existing appraisal or not.  Also consider asking the appraiser if there are specific banks that will accept the appraisal.  That might be quicker than randomly choosing banks.   It may be that your current bank just isn't used to investment properties.  Requiring the previous owner to do repairs prior to sale is very common in residential properties.  It sounds like the loan officer is trying to use the rules for residential for your investment purchase.  A different bank may be more inclined to work with you for your actual purchase. "The first red-flag here is that an appraisal was not performed on an as-is basis - and if it could not be done, you should be told why. Getting an appraisal on an after-improvement basis only makes sense if you are proposing to perform such improvements and want that factored in as a basis of the loan. It seems very bizarre to me that a mortgage lender would do this without any explanation at all. The only way this makes sense is if the lender is only offering you a loan with specific underwriting guidelines on house quality (common with for instance VA-loans and how they require the roof be of a certain maximum age - among dozens of other requirements, and many loan products have their own standards). This should have been disclosed to you during the process, but one can certainly never assume anyone will do their job properly - or it may have only mentioned in some small print as part of pounds of paper products you may have been offered or made to sign already. The bank criteria is ""reasonable"" to the extent that generally mortgage companies are allowed to set underwriting criteria about the current condition of the house. It doesn't need to be reasonable to you personally, or any of us - it's to protect lender profits by aiding their risk models. Your plans and preferences don't even factor in to their guidelines. Not all criteria are on a a sliding scale, so it doesn't necessarily matter how well you meet their other standards. You are of course correct that paying for thousands of dollars in improvements on a house you don't own is lunacy, and the fact that this was suggested may on it's own suggest you should cut your losses now and seek out a different lender.  Given the lender being uncooperative, the only reason to stick with it seems to be the sunk cost of the appraisal you've already paid for. I'd suggest you specifically ask them why they did not perform an as-is appraisal, and listen to the answer (if you can get one). You can try to contact the appraiser directly as well with this question, and ask if you can have the appraisal strictly as-is without having a new appraisal. They might be helpful, they might not. As for taking the appraisal with you to a new bank, you might be able to do this - or you might not. It is strictly up to each lender to set criteria for appraisals they accept, but I've certainly known of people re-using an appraisal done sufficiently recently in this way. It's a possibility that you will need to write off the $800 as an ""education expense"", but it's certainly worth trying to see if you can salvage it and take it with you - you'll just have to ask each potential lender, as I've heard it go both ways. It's not a crazy or super-rare request - lenders backing out based on appraisal results should be absolutely normal to anyone in the finance business. To do this, you can just state plainly the situation. You paid for an appraisal and the previous lender fell through, and so you would like to know if they would be able to accept that and provide you with a loan without having to buy a whole new appraisal. This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now.  Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans."
"Often the counter-party has obligations with respect to timelines as well -- if your buying a house, the seller probably is too, and may have a time-sensitive obligation to close on the deal. I'm that scenario, carrying the second mortgage may be enough to make that deal fall through or result in some other negative impact. Note that ""pre-approval"" means very little, banks can and do pass on deals, even if the buyer has a good payment history. That's especially true when the economy is not so hot -- bankers in 2011 are worried about not losing money... In 2006, they were worried about not making enough!" "There is considerable truth to what your realtor said about the Jersey City NJ housing market these days. It is a ""hot"" area with lots of expensive condos being bought up by people working on Wall Street in NYC (very easy commute by train, etc) and in many cases, the offers to purchase can exceed the asking price significantly. Be that as is may, the issue with accepting a higher offer but smaller downpayment is that when the buyer's lender appraises the property, the valuation might come in lower and the buyer may have to come up with the difference, or be required to accept a higher interest rate, or be refused the loan altogether if the lender estimates that the buyer is likely to default on the loan because his credit-worthiness is inadequate to support the monthly payments. So, the sale might fall through. Suppose that the property is offered for sale at $500K, and consider two bids, one for $480K with 30% downpayment ($144K) and another for $500K with 20% downpayment ($100K).  If the property appraises for $450K, say, and the lender is not willing to lend more than 80% of that ($360K), then Buyer #1 is OK; it is only necessary to borrow  $480K - $144K = $336K, while Buyer #2 needs to come up with another $40K of downpayment to be able to get the loan, or might be asked to pay a higher interest rate since the lender will be lending more than 80% of the appraised value, etc. Of course, Buyer #2's lender might be using a different appraiser whose valuation might be higher etc, but appraisals usually are within the same ballpark.  Furthermore, good seller's agents can make good estimates of what the appraisal is likely to be, and if the asking price is larger than the agent's estimate of appraised value, then it might be to the advantage of the selling agent to recommend accepting the lower offer with higher downpayment over the  higher offer with smaller downpayment. The sale is more likely to go through, and an almost sure 6% of $480K (3% if there is a buyer's agent involved) in hand in 30 days time is worth more than a good chance of nothing at the end of 15 days when the mortgage is declined, during which the house has been off the market on the grounds that the sale is pending. If you really like a house, you need to decide what you are willing to pay for it and tailor your offer accordingly, keeping in mind what your buyer's agent is recommending as the offer amount (the higher the price, the more the agent's commission), how much money you can afford to put down as a downpayment (don't forget closing costs, including points that might be need to be paid), and what your pre-approval letter says about how much mortgage you can afford.  If you are Buyer #1, have a pre-approval letter for $360K,  and have enough savings for a downpayment of up to $150K, and if you (or your spouse!)  really, really, like the place and cannot imagine living in any other place, then you could offer $500K with 30% down (and blow the other offer out of the water). You could even offer more than $500K if you want. But, this is a personal decision.  What your realtor said is perfectly true in the sense that for Y > Z, an offer at $X with $Y down is better than an offer at $X with $Z down. It is to a certain extent true that for W > X, a seller would find an offer at $X with $Y down to be more attractive that an offer at $W with $Z$ down, but that depends on what the appraisal is likely to be, and the seller's agent's recommendations." I wanted to know that what if the remaining 40% of 60% in a LTV (Loan to Value ratio ) for buying a home is not paid but the borrower only wants to get 60% of the total amount of home loan that is being provided by lending company. Generally, A lending company {say Bank] will not part with their funds unless you first pay your portion of the funds. This is essentially to safeguard their interest. Let's say they pay the 60% [either to you or to the seller]; The title is still with Seller as full payment is not made. Now if you default, the Bank has no recourse against the seller [who still owns the title] and you are not paying. Some Banks may allow a schedule where the 60/40 may be applied to every payment made. This would be case to case basis. The deal could be done with only paying 20% in the beginning to the buyer and then I have to pay EMI's of $7451.  The lending company is offering you 1.1 million assuming that you are paying 700K and the title will be yours. This would safeguard the Banks interest. Now if you default, the Bank can take possession of the house and recover the funds, a distress sale may be mean the house goes for less than 1.8 M; say for 1.4 million. The Bank would take back the 1.1 million plus interest and other closing costs. So if you can close the deal by paying only 20%, Bank would ask you to close this first and then lend you any money. This way if you are not able to pay the balance as per the deal agreement, you would be in loss and not the Bank. Banks in New Zealand tend to take a lien that is higher than the amount of the loan, so that your only option for a second mortgage is with them. ASB wanted 50% more than the value of the loan when I had my mortgage with them. Of course, with house price inflation the way it's been in NZ, the value of your house may have outstripped the lien anyway, and you can mortgage the rest of it with anyone you like. I suspect your lawyer will need to inform the other lienholder, but you don't need their permission. The bank doesn't want to loan you money to build a house on property you don't own. What happens if the owner gets mad at you and wants you to leave? What happens if the owner's will gives the land to somebody else? The bank would be taking a big risk. You need to buy the land before building the house. Never ever use a giant monster mega bank for home loans.  I am sure you probably didn't and they bought your loan from someone else.  You have no legal options.  What you should do Is look at getting a new loan maybe a 15 year loan.  Your payment might be the same with no PMI. I would check with a relator to see what they think your home is worth.  Also if you have any money you can always pay extra to the principle and get yourself to 20% based on the next appraisal.   You might have a legal option regarding what they say you need in value 350k is what it should appraise to for you to get rid of pmi when you owe 280k Remember Citibank is a publicly traded company and their goal is to make more money. The CEO has a fiduciary relationship with stock holders not customers.  They seriously have board meetings to figure out what charges they can invent to screw their customers and make shitloads of money.  There is no incentive for them to let you get out of your PMI. "The comments are getting too much, but to verify that you are not insane, you are being bullied.  It sounds like this is a sub-prime loan, of which you are wisely trying to get out of.  It also sounds like they are doing everything in their power to prevent you from doing so.  For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan.  What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many ""credit representation"" type business are only offering loan consolidation.  That is not what you need. Fight those bastards!" You'd have to consult a lawyer in the state that the transaction took place to get a definitive answer.  And also provide the details of the contract or settlement agreement. That said, if you clearly presented the check as payment (verbally or otherwise) and they accepted and cashed the check, and it cleared, you should have good legal standing to force them to finalize the payment.   While they had every right to refuse the payment, and also every right to place a hold on the credit until the transaction cleared their bank, they don't have the right to simply claim the payment as a gift just because it came in a different form than they specified in the contract.  Obviously this is a lesson learned on reading the fine print though.  And, to be frank, it sounds like someone wants to make life difficult for you for whatever reason. And if that is the case I would refer back to my initial comment about contacting a lawyer in that state. Make sure that when you have the loan you still contribute enough to get the company match. For example:  An inability to maximize the match might need to be figured into the opportunity cost of the loan. Some companies will suspend your contributions for a specific number of months for a hardship withdraw.  Make sure you understand where the money comes from for the loan. Can you count the money that the company matched but you are not vested with, when determining the maximum amount of the loan?  If the money is in what is now a closed fund can you replenish the funds back into that fund if use it to fund the loan? Know what the repayment time period is of the loan. If I understand correctly you describe putting a hold on an appartment as such: A sum of money that you give to the owner of the appartment to let them hold it for you because you are probably going to rent. In case you back out of the deal, this money can mitigate the expected loss from turning down other candidates. After asking them to hold the appartment for you, you decided not to rent. Also, you used the bank to get back the hold sum. Regardless of the legal details, it seems very clear to me that after putting down a hold and walking away, you should not get the money back.  There may have been some things that distracted/confused you (call about the key), but if you actually look at the things that happened it seems both right and practical to pay them their reclaimed hold as soon as possible. There is no law requiring someone to return a refused check. You need to clarify whether this payment is to establish a retainer, or to pay for services rendered. Either way you should stop payment on the check and send them a certified letter explaining that you are stopping payment on the check because they refused it. If the payment is to establish a retainer, then the issue is simple: the lawyer requires $10,000 as a retainer before you can engage them and until then you have no relationship with them. If that is the amount they want, then less than that is not accepted. If the payment is for services rendered already and you owe them money, then it is a completely different situation. Refusing partial payment means they are getting ready to sue you. In a collection suit, the larger the amount is, the better. Normally, someone owed money will only refuse a partial payment if they anticipate having to sue the debtor and they want to maximize their leverage in case of a court judgement in their favor. A creditor has the right to refuse a partial payment. As far as I can see, this is an issue of the bank's policy rather than some legal regulation. That means that you'll need to work it out with the bank.  To give you a couple of ideas to work with when you talk with them, maybe something from this list will work: Good luck! It's sad.  My mother lost her job after a brutal divorce.  BOA bought up Countrywide, then when my mother pleaded for assistance BOA said they could not help her unless she was behind/in default of her mortgage.  She tried to do a deed-in-lieu with a lawyer and BOA refused to accept the deed-in-lieu many times.  Then BOA sold her mortgage to Green Tree (?) and they refused her deed-in-lieu as well.   This went on for over 2 years and they foreclosed on the house.  I told my mother to sue because they should have accepted her deed-in-lieu because it was approved by the court in her bankruptcy but she was tired of trying to save her house that she just walked away.  6 months after she left and moved in with my sister Green Tree called her offering a refinance at a lower rate and a mortgage payment that was less than a typical car payment.  Now 5 years later my mom is just going to pay cash for her house and never do a mortgage again. To supplement existing answers: the appraised value does not necessarily represent the net amount the bank could actually recover with a foreclosure. Let's look at it from the point of view of the bank.  Suppose the property appraises at $200,000 and they do what you want: loan you $200,000 with the property as collateral.  Now suppose a short time later, you quit paying the mortgage and they have to foreclose.  Can the bank get their $200,000 back? An appraisal is only an estimate; nobody can predict perfectly how much a property will sell for.  Maybe the appraiser missed something significant, and the property will only fetch $180,000. Even if the appraisal was accurate when it was made, property values may have dropped in the meantime.  Maybe a sudden economic crisis is driving real estate prices down across the board.  Maybe interest rates have spiked.  Maybe the county has changed the zoning regulations to locate a toxic waste dump next door to the property.  In any of these cases, the property may again fetch well under $200,000. Maybe the condition of the property has changed.  Perhaps you trashed the place and it will take $30,000 to clean it up.  (People have a tendency to do things like that when they get foreclosed.) If the bank wants to get full market value for the property, they will incur the usual costs of selling a property: paying a real estate agent's commission, painting, renting furniture to stage the property, and so on.  This will eat into the net amount they actually get from the sale. It may take some time (perhaps months) for a property to sell at its full market value.  During this time, the bank is out $200,000.  That's money they would rather be loaning out at interest to someone else, so this represents lost income. Foreclosing a mortgage is a fairly complicated procedure.  The bank has to pay its staff, including lawyers, for a significant number of hours to get the foreclosure done.  There will be court filing fees and so on.  If you refuse to leave, they may have to get the sheriff to evict you; that has a fee as well.  If you fight the foreclosure, that racks up even more legal fees.  This too eats into the net proceeds from the sale. So if the bank loans you the full $200,000, they stand a pretty significant risk of not getting all of it back, after expenses.  You can understand that risk may not be worth the interest they would get from you on the extra $40,000. On the other hand, if they loan you only 80% of the property's appraised value ($160,000), they effectively shift that risk onto you.  Should you default on the loan, and they foreclose, all they have to do is sell the property for $160,000 or a little bit more.   That shouldn't be too hard, even if it is not freshly painted or a bit trashed.  They probably don't need to hire a real estate agent: just hold a quick auction, maybe first calling up a few investors who might be interested in flipping it.  If it happens to sell for more than the outstanding principal of the loan, plus the bank's costs, then they will pay you the difference; but they have no incentive to make that happen, and every incentive to just get it sold quick.  So any difference between the property's true value and the actual sale price now represents a loss to you first, not to the bank. So you can see why the bank would rather not loan you the full value of the property.  80% is a somewhat arbitrary figure but it cuts their risk by a lot. It's just possible that if you have your home appraised (probable cost a few hundred $), and the value is sufficiently higher than what the mortgage company is owed, that they will let this slide, since they are covered. Many banks, at least, allow secured lines of credit against the equity in your home, and allow the amount of the loan to increase if/as the value of the property goes up and your equity increases. However, I'd run this by the mortgage company before investing in the appraisal, since they may not be as flexible this way as the banks I've dealt with, and in any case it's a gamble unless you are certain of the value of your property.