1. Furniture included on a contract
If ANY Furniture is included on a contract(even though it states it has no value in the contract) the loan-to-value will be reduced by the value of the furniture. The furniture will have to be appraised and the amount of that appraisal will be reduced from the purchase price which may result in a buyer having to come to closing with additional funds. The best thing to do, is to have it removed from the contract.
2. Leasebacks
If a buyer is purchasing a home as a primary residence or a second home, the seller cannot lease the property back for more than 60 days. If this occurs, the buyer must purchase the property as an investment property which will result in a higher interest rate and possibly more of a down payment.
3. Seller Contributions
A seller can only pay for closing costs and/ or pre-paids. The buyer cannot receive any credits for repairs. If the seller is crediting for repairs, the addendum to the contract must be a contribution to the buyer for “closing costs” and not “repairs.” The seller cannot contribute anything toward buyers down payment.
4. Financing Contingencies
Understand Loan commitments. If a loan commitment requires documentation from the buyer and the buyer cannot supply what is asked for, your buyers escrow is in jeopardy. Once a loan commitment is issued, the only condition that can “save” your buyers escrow deposit is a property condition( i.e. appraisal, repairs, etc…) if a condition on the loan commitment has anything else other than a “property” condition and the buyer cannot meet the condition, the buyer could lose their escrow deposit. It is very important that the agent follow up on the appraisal. The appraisal should not take long than two weeks from the time of application. if more than two weeks have gone by, the agent needs to follow up immediately.
5. The contract musts be READABLE. If it has been faxed several times and the final contract cannot be read, you will need to get all parties to sign a new and CLEAR contract. Lenders will not accept unreadable contracts. You can send a contract that is not fully executed, but readable and we can marry that with the illegible contract that is fully executed.
6. “Owner of Record” is not an acceptable seller. You must have the actual sellers name on the contract.
7. Be sure to know your seller contribution limits for closing costs on your contract. 6% of the purchase price on FHA and Conventional loans at a 90% or less loan-to-value. Any conventional loans over 90% only allow 3% seller contribution. If the buyer is purchasing the property as an investment property, they are limited to 2% seller contribution.
Courtesy of Jonathan Smith, Coldwell Banker Home Loans
If ANY Furniture is included on a contract(even though it states it has no value in the contract) the loan-to-value will be reduced by the value of the furniture. The furniture will have to be appraised and the amount of that appraisal will be reduced from the purchase price which may result in a buyer having to come to closing with additional funds. The best thing to do, is to have it removed from the contract.
2. Leasebacks
If a buyer is purchasing a home as a primary residence or a second home, the seller cannot lease the property back for more than 60 days. If this occurs, the buyer must purchase the property as an investment property which will result in a higher interest rate and possibly more of a down payment.
3. Seller Contributions
A seller can only pay for closing costs and/ or pre-paids. The buyer cannot receive any credits for repairs. If the seller is crediting for repairs, the addendum to the contract must be a contribution to the buyer for “closing costs” and not “repairs.” The seller cannot contribute anything toward buyers down payment.
4. Financing Contingencies
Understand Loan commitments. If a loan commitment requires documentation from the buyer and the buyer cannot supply what is asked for, your buyers escrow is in jeopardy. Once a loan commitment is issued, the only condition that can “save” your buyers escrow deposit is a property condition( i.e. appraisal, repairs, etc…) if a condition on the loan commitment has anything else other than a “property” condition and the buyer cannot meet the condition, the buyer could lose their escrow deposit. It is very important that the agent follow up on the appraisal. The appraisal should not take long than two weeks from the time of application. if more than two weeks have gone by, the agent needs to follow up immediately.
5. The contract musts be READABLE. If it has been faxed several times and the final contract cannot be read, you will need to get all parties to sign a new and CLEAR contract. Lenders will not accept unreadable contracts. You can send a contract that is not fully executed, but readable and we can marry that with the illegible contract that is fully executed.
6. “Owner of Record” is not an acceptable seller. You must have the actual sellers name on the contract.
7. Be sure to know your seller contribution limits for closing costs on your contract. 6% of the purchase price on FHA and Conventional loans at a 90% or less loan-to-value. Any conventional loans over 90% only allow 3% seller contribution. If the buyer is purchasing the property as an investment property, they are limited to 2% seller contribution.
Courtesy of Jonathan Smith, Coldwell Banker Home Loans
