Background : I ended up in a nasty situation where my FHA lender had over 7 weeks to prepare, and through indolence, was going to miss closing. Lender became very unresponsive - multiple multi-day periods with no emails and no phone calls returned. In desperation, I phoned other lenders and found one who reckoned they had a chance of meeting my closing date just two weeks later. Having no other options, I asked them to try and said that if they manage to hit the closing date, I'm going with them over the original lender, even if the original lender suddenly by some miracle suddenly came through.

Neither lender hit the closing date, but once the new lender was in the picture, the old lender suddenly, magically, started being amazingly responsive and efficient, and ended up being ready to close one day late. (That one day late caused significant expense and inconvenience to myself and the sellers, but that's somewhat incidental.)

That was last Friday, and the sellers were unwilling to wait until the Monday when the new lenders reckoned they too would likely have been ready to close, the which would've been two business days / four calendar days late compared to the original closing date, but an astoundingly fast two and a half weeks or so since the time they started work on my case - an extremely good job!

The new lenders were working on getting me a conventional mortgage not an FHA, and that alone works out to be worth tens of thousands of dollars more over a 30 year mortgage. I offered the sellers $3,500 cash on the Friday if they would agree to wait into the new week so I could close with the new lender. Remember : the house contract had expired on the day before - i.e. the Thursday - so at this point the sellers had every right to just walk away or do whatever they want. Also unfortunately, they had come to know that the old lenders had - albeit one day too late - finally become ready to close the loan. The sellers made it clear they were not interested even in $3,500 compensation for waiting over the weekend - they needed to close that day (the Friday).

In the end, I closed on the Friday, sad to be letting the conventional loan go when it was so close, and sad to be financially rewarding the indolent lenders, especially when the new lenders had done such a truly astounding job.

The sellers were unwilling to wait beyond Friday, but didn't care which lender I closed with. The new lender had a chance of being ready to close that day, but as the day progressed, it became less and less likely. I drove off to closing, knowing that unless I got a phone call from the new lenders saying things had moved forward very well, it would have to be closing with the old lenders. As I drove to the closing location, the new lenders phoned and advised that it looked very unlikely that they would be ready that day (Friday) - that it was most likely going to be Monday or Tuesday (what is now today or tomorrow). The loan had passed underwriting, and was in Quality Control. This on the one hand meant it was extremely close, and on the other, that there was still no guarantee that it would come through. It had to pass QC to get a "clear to close", and after that, docs & funding could be done. I had dearly hoped otherwise, and I wasn't entirely convinced the first lenders were going to successfully close (my first time buying a house - not sure what to expect, and a little on the skeptical side), and I wasn't sure what options I might have if the new lenders were able to finish the little bit of work required in QC and give me a clear to close, so I left them to complete the QC and see what happens.

It's Monday, and indeed I got a "clear to close" from the new lenders today. But closing with the old lenders did go through just fine on Friday.

I'm wondering if there's any way I can now switch my loan from the FHA I signed up with one business day / three calendar days ago, to this conventional loan.

I recognize that it would need to go through underwriting again because the numbers will now be different and because probably it'll be deemed to be a refinance not a purchase.

My main concern is the up-front mortgage insurance that was added to the FHA loan - approx $6,500 worth in this case - is there ANY way I can get a partial refund given that the FHA loan happened literally just one business day ago? My reading indicates that no, I have no chance of getting any of that back unless I refinance into another FHA loan within the next 3 years, but it's the conventional loan I want to switch to. It's a long-shot, but is there ANY relief available - any FHA "cooling off" period, anything of any kind that can help me get most or even just some of that $6,500 back if I switch right now to a conventional loan?

My second concern is, if indeed that approx $6,500 is wasted / gone forever / not even in tiny part refundable, how best to evaluate whether it's worth jumping now to the conventional loan that is available but with a repeat of closing costs + an extra $6,500 or so in the loan due to the FHA up-front mortgage insurance, or whether I need to sadly accept that the conventional loan, approved and clear to close as it is and only one business day later than the FHA loan was commenced, accept that switching to the conventional loan at this point is simply not going to stack up favorably financially. How would I best evaluate that?

FYI, it's my first time ever buying a home, and I'm a newbie to understanding mortgages.

Thanks for your advice in this tricky situation I never wanted to be in!

UPDATE Tue 9am: I just rang the HUD Mortgage Insurance Premium Refund Support Service Center and was informed that there is a "grace period" between when a loan is commenced and when information & UFMIP must be submitted to HUD. If the old lender cancels the FHA case during this grace period, no money will be due HUD. If I understand this correctly, this means that I could now actually get the UFMIP back, in full, but only if the old lender feels like helping me out that way. The old lender has no obligation to help me out that way, and presumably they stand to lose income from the loan if the loan is paid out so quickly after opening. So, from their perspective, why would they want to help that way? Does this sound right, or am I missing something? Thanks!

  • 1
    Regarding the sellers: delaying over the weekend moved the settlement day into a new month. Also you may have been the first of a domino of transactions. If they didn't sell their house they couldn't buy their new one. – mhoran_psprep Jun 2 '15 at 10:46
  • @mhoran_psprep Yes - the sellers were very reasonable in explaining to me their situation and I fully understand why they felt they couldn't wait. The sellers were not at fault in any way. – Usas Jun 2 '15 at 12:10

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