Tips on Home Financing10 Oct 2013, Posted by Home Buying Tips in
Nightmares in Financing
I had a unique situation play out over the past month that I think home sellers can benefit from knowing about. I had a listing customer of mine accept a purchase offer from a buyer who was choosing to finance the purchase with FHA financing. The borrower had previously been approved and had almost closed on another home but the inspections came back badly so they did not move forward. The benefit was that they had all their loan paperwork in order and were ready to move forward quickly on my listing. Shortly after the contract came together, the buyer’s agent presented a loan commitment letter to us wherein the lender committed to loan the money to the borrower. After all of the other contingencies were removed, the seller had a solid contract and could begin packing and moving forward. Just as closing was coming, I got a call from the buyer’s agent telling me that the lender was now refusing to make the loan based on some new information that came in. This of course was very distressing to me and the seller. Luckily we had a happy ending and after a multi-week delay we ended up closing after all. I believe that the seller would have been entitled to the buyer’s deposit if they did not close after presenting the commitment, however there are a few takeaway’s here that can help you bullet proof your contract and avoid and any issues with your closing. The list below are all additional services that I perform for sellers when representing them in a sale:
- Ensure that the deposit is enough to make you whole if for some reason the buyer does not close. If you cannot get upwards of a $5,000 to $10,000 deposit out a buyer, beware. In many instances, cash sales are subject to a 10% deposit.
- Dig deeper than the preapproval. Have your agent call the buyer’s loan officer and ask some questions. Usually you can learn a lot by this.
- If the buyer is using a mortgage broker rather than a bank, ask who the lender is. Some lenders are best avoided and your agent might be able to advise you.
- Ask if the mortgage representative reviewed tax returns and actual income verification before issuing the loan pre-approval. This can avoid the surprise of having the loan commitment not be able to be issued.
- Consider asking to reword the financing contingency in the state contract. Currently, it is very liberal and most buyer’s will not agree to modify it, but if you have a lot to lose if a sale does not timely complete, you may wish to go this route or find a different buyer.
Hopefully these tips can help you make a smart decision as you weigh out the issues to consider when accepting a financed offer on your home. Understand however, that in today’s lending environment, changes can be dynamic and unexpected bumps in the road do come up. That is when you need the experience of a seasoned agent to help you navigate the next steps.
If you need any help navigating home financing, please feel free to contact me.