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 HOMEOWNERSHIP
Larger EMD = Offer Accepted!
2011 Recap: Larger Down Payments
While everyone is trying to refinance their mortgage with HARP 2.0 and rates at historic lows, we actually had 40% of our closed loan transactions were purchases in 2011. This is almost the exact same mark we saw in 2010.
2011 was good and bad for the housing market. The bad side including purchase activity in the Midwest declined 15% from 2010; down 30% for us personally. This is due to there no longer being a Home Buyer Tax Credit in 2011. This was huge as 70% of our purchase deals in 2010 were before the tax credit expired in May. Also, the consumer confidence after the tax credit expired was substantially lower than what we are seeing now. Buyers are also saying there are fewer homes on the market right now than they’d like to see.
The good news is that our average loan size increased for 2011 as well as buyers made larger down payments. 40% of our buyers put at least 20% down on their purchases. With loan amounts increasing on FHA and Conventional loans, this tells us that appraisal concerns continue to be less of an issue as we move forward which is great news.
Our predictions for 2012 can be stated with this fact: We received more purchase lead inquiries in December of 2011 than we did for the whole 1st Quarter of 2011. It feels like the consumers have more confidence and there is definitely a buzz in the housing market going into 2012.
The last Purchase loan program that doesn’t require an appraisal
One of the most frustrating parts of the mortgage process can be the appraisal. We get daily calls from realtors venting about a low value, with questions about a neighborhood with limited comparable values, or just simply asking appraisal 101 questions. While the new HARP guidelines are helping get appraisal waivers for refinances, there is one last purchase loan program that does NOT require an appraisal- the Fannie Mae HomePath Mortgage.
Here are some of the main points you need to know about the Fannie Mae HomePath program:
- No Appraisal Required
- No Private Mortgage Insurance needed, even with less than 20% down
- Primary Residence Buyers:
- Get first 15 days without having to compete with investors
- 640 Minimum credit score with as little as a 3% down payment
- Gift funds are allowed
- Investment Property Buyers:
- As little as 10% down
- Again, no PMI needed
Visit HomePath.com to search for properties in Michigan that are eligible for this great program.
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