You have the money to buy a new home, however it would be nice to not have to drain your savings. The good news is; the seller can help with your cost to do a loan, which can be significant. Although you will always want to check with your lender to be sure that they follow Fannie Mae and Freddie Mac rules for this, it can be a great when negotiated into your contract.
You will need to weigh the benefit, is it more helpful to negotiate the price or ask the seller to cover some or all of your costs? Sometimes reducing the sales price doesn’t impact your payment as much and perhaps bringing less to closing is a better option.
Maybe ask for both? Your realtor will have a good sense if it is something that you should include in your offer, taking into consideration how long the home has been on the market, is it a hot market etc., in some situations a full price offer may be necessary.
Per Fannie Mae, their approved concessions limits are:
*If your loan-to- value is greater than 90% the seller can contribute up to 3% of the sales price toward your cost to do the loan.
* If your loan-to- value is between 90% and 75.01% the seller can contribute up to 6% of the sales price toward your cost to do the loan
* If your loan-to- value is 75% or less the seller can contribute up to 9% of the sales price toward your cost to do the loan
These maximum limits also typically apply to the Physician Loan Programs included in our list of lenders.
Now, the thing to keep in mind is that typically the lender will only allow the seller to contribute up to the amount of your actual costs (closing costs and pre-paid items). You cannot get cash back or make money on the transaction, although that does sounds like a great idea!!
So, if your credit is for $10,000 and your costs are only $6,000 you may be leaving money on the table. If the credit is $10,000 and your costs are $6,000 but you also have a tax proration credit for $2,000, then the seller can only contribute $4,000. This is something to consider and it will be difficult to go back and ask for a price reduction in order to make sure you aren’t leaving anything behind. Some lenders will take the difference (the unabsorbed) funds and apply them to your new loan balance; again, this is something you would need to ask your lender about. If your lender allows for a principal credit your approved loan amount will not change, you will need to view this as a simple credit and a better equity position.
Sellers are doing this and it doesn’t always matter what the sales price is. One scenario that it may not work with is if the seller doesn’t have room based on what their payoff is to assist. It is likely in this situation that they wouldn’t be able to come down on the price either.
Don’t rule anything out, discuss it with your agent, discuss it with your lender, weigh it out and make your offer!
When searching Doctorloanprograms.com make sure to check with your lender on their max allowable seller contribution requirements.
Search for a Physician Loan Program available in your state here.