We are seeing a number of Pre-Approved buyers who placed offers losing out to competition. Here are the some of the tactics that buyers and agents were considering when placing an offer.
1) Conventional Loans are more appealing than FHA ► This is not the case. The house is either in good shape or it is not, and sellers are more concerned with the cash needed to close.
2) Large down payments must be an advantage ► This may be percived to be true, but a 20% down payment from a buyer only offering to put $100 up for the Earnest Money Deposit (EMD) smells funny to me.
3) Pre-Approval detailing they can qualify for more than the offer price ► This also is not advantageous considering it only takes about 5 minutes to get a pre-approval letter from a loan officer.
Offer price is the most important piece to the seller and listing agent. The buyer’s credibility and seriousness can be clearly stated by the EMD they put up with the offer.
For example, let us look at two offers on a home.
1) $180,000 offer with a conventional loan, 5% down payment and $1,000 EMD.
2) $180,000 offer with a FHA loan, 3.5% down payment and $6000 EMD.Offer 2 indicates a much more serious buyer with the higher EMD and cash needed to close will be less of a concern.
We’d love to hear your thoughts on this so PLEASE comment below!
Posts tagged APPROVAL
Larger EMD = Offer Accepted!
PA Fallout? We can help!
The chief economist for NAR has recently sighted that contract failure rates have hit a staggering 33%, up from 18% the prior month. NAR claims the main reason for this is due to declined mortgage applications and appraised values.
This is not making any sense to us as lending guidelines continue to open up making it easier for buyers to qualify for home loans.
- Down Payment requirement down to 20% for Jumbo Loans
- Down Payment requirement down to 3% for Conventional Loans
- Credit Score requirements lowered to 620
- Many conventional loans only require a Drive-By Appraisal
- Purchase Transactions have priority and are flying through Underwriting
This is great news heading into 2012 with expanding loan options. Purchase Agreements are falling apart for a number of different reasons. Call us if we can help your buyer understand what needs to be done to get their loan clear to close. Or call us if we can help you understand what the lender is telling your buyer.
Do you agree with NAR’s findings? Comment below, we would love to hear your thoughts!
Rural Development Update
The USDA Rural Development (RD) program, the last ZERO down payment option for home buyers, has been modified effective 10/1/11. The biggest change is that the RD loans now have mortgage insurance (PMI) built into the borrower’s monthly payment. This well help provide more funding for the program without hurting the tax payers.
Good news from this change is the Upfront funding fee is now significantly reduced. A $100,000 purchase price would have the funding fee reduced from $3,600 to $2,000, but also would add a monthly PMI of $25 to the monthly payment.
RD funding has NOT been approved for the new fiscal year yet. If your buyers do not have the full loan commitment, there may be delays before the additional funding is approved. Also, make sure to have buyer qualifications re-verified if they’ve been Pre-Approved for an RD loan due to the payment increase.
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