Re: Cause Problems With Loan??? - Posted by Vic
Posted by Vic on March 24, 2001 at 23:06:32:
John Boy,
These are all excellent ideas & I’ve even written them down in my notebook full of good tips from this site, which I keep right next to computer.
I guess the problem I’m having with this is that if you give the buyer cash, merchandise, etc, when would you do it? If you give them cash at the sale, then that would require a loan that would allow for a gift of whatever size you are giving them. What if the loan wouldn’t allow for a gift of that size?
FHA for example has specific rules about gift money i.e. it cannot come from the seller. So if you have a buyer that is buying a 100K house & they only have 1500 for a down pmt & you match it, then that causes a problem. The seller cannot give them anything towards down pmt. (yes, I know there’s other ways of structuring it, such as paying closing costs but for sake of this discussion, I’m leaving that out). Thus you would not be allowed to give them the cash.
This also applies to some conventional loans in that the lender will require the borrower to have their own 5% into the deal & many times they require that this 5% be seasoned for a period of time as well. What happens when they only have 2% seasoned. If you put up the other 3, the loan won’t fly.
In the above 2 examples if you put in the contract that seller will match buyer’s deposit or give them X amount of money, then the lender will never approve the deal.
Maybe I’m missing something or maybe I’m not fully understanding: How you can give the buyer anything of real value like this without it causing a problem with the lender?
I guess I’m just trying to figure out how you would do this. Let’s take another example: If you were to put in a contract that seller will buy buyer a car, wouldn’t you think that an underwriter would question that & think something suspicious? If you don’t put it in the contract, then how do you give it to the buyer? Do you wait til after the sale? Certainly you’re not going to buy them a car before you’ve cashed the proceeds check. If you give it to them after the sale & should the lender ever find out about it, then wouldn’t that cause a problem, especially if the lender had to foreclose?
Do you see what I’m getting at? How do you make this thing work?
I’ve also had situations sometimes when the seller says he’s going to replace carpet, etc & the underwriter comes back & says it must be done prior to close. Also, if the amount of money that the seller is giving as an allowance is too high, sometimes this causes problems as well. I guess it all depends on the loan &/or the underwriter.
As I was reading your post, I was thinking about those 2 houses that I’ve got. BTW, one should be going to close in the next 2 wks. & I think I’ve got the other one sold too (finally sheewwww!). But your idea did intrigue me though & I think it’s a very, very good one. So much so, that I very may well try to use it if I can figure out how to make it work.
Thanks for all the great, informative & very helpful posts that you consistently put up.
Vic