What Are Seller Concessions When Buying a Home?

What Are Seller Concessions When Buying a HomeBuying a home is probably one of the largest transactions you’ll make in your lifetime.

In most cases, you’ll not only be paying for the home but will also be paying interest and many additional closing costs. Because of this, you’re going to want to save as much money as possible in the transaction.

Seller concessions is one way that buyers can save some money. In some cases, this can be a substantial savings.

Here is some helpful information on seller concessions and how you may benefit from them.

What Are Seller Concessions?

Seller concessions are also referred to as seller contributions because that’s exactly what they are. They’re contributions the seller agrees to pay during the closing of the mortgage loan.

Home buyers often forget, or may not even be aware of, the many closing fees involved in the home buying process. As the loan closing approaches, they’re reminded that there are many additional fees many of which must be paid at the closing.

In some cases, these fees may be added into the loan. However, if they can’t be added in, it can result in the buyer being forced to cancel the sale if he or she can’t afford to pay the fees. Seller concessions can help the buyer complete the transaction because the seller will pay some or all of the extra fees.

What Type of Fees Are Included in Seller Concessions?

Sometimes, buyers have their finances stretched to the limit after they’ve put down a down payment. As stated above, loan closing costs can add up to thousands of dollars.

It’s seldom the same in every transaction. Some of it may depend on state laws regarding real estate purchases, and some of it may depend on the value of the home.

Closing costs may include any or all of the following:

  • Title insurance costs
  • Transfer fees
  • Inspection fees
  • Attorney fees
  • Loan processing fees
  • Appraisal fees
  • Fees for credit reports

Is There a Limit on Seller Concessions?

State laws, as well as geographic location, may also dictate the amount or type of fees that may be included in a seller concession.

There are limits as to how much a seller can pay in concessions. The limits are usually between 2 and 9% of the home’s appraised value.

Although the amount can be negotiated between the mortgage broker and real estate agent, these factors can also play a role in determining the amount of the concessions:

  • Type of mortgage
  • How the home or property will be occupied
  • Amount buyer borrows

Advantages of Seller Concessions

The main advantage to seller concessions is that the buyer is going to save money and may be able to purchase a home that he or she might not otherwise be able to afford.

While it appears that seller concessions benefit just the buyer, they can also benefit the seller.

If the seller is eager to sell the real estate, paying for all or some of the closing costs can speed the process along. If the seller is planning to buy a different home, the seller is probably going to be eager to sell.

Paying the concessions can make the original sale go quicker, which will make it possible to purchase the second property quicker.

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What Documentation is Required to Get a Mortgage?

What Documentation is Required to Get a Mortgage?When you’re in the process of seeking a mortgage, there are several pieces of documentation that will be required.

The complete list of requirements is slightly different from one person to the next.

Nevertheless, there are some universal pieces of documentation that are required for all mortgage applicants.

With that in mind, let’s look first at those consistently required and then the specific requirements related to VA loans.

Universally Required Documentation

Filling out a standard mortgage application will alert to the types of documentation expected.

  • The applicant will need to sign an agreement that will allow the lender access to several pieces of the applicant’s personal information.
  • The applicant’s social security number and credit report are the most significant personal data collected once the applicant grants permission.
  • Generally, a month’s worth of pay stubs and two years’ worth of W-2s are also expected.

The lender requires the information related to this disclosure agreement to assess the applicant’s financial and employment history so as to make an informed decision regarding the loan request.

Once all the disclosures have been signed, if a lender approves a mortgage application, more personal information will be gathered from the new client in order to help find the best possible fit among the different options available.

At this time, identification including a driver’s license will be required. Further financial documentation will be necessary in this stage of the mortgage planning process.

These include bank statements, and employment verification.

Documents Relating to the Home

Furthermore, documentation will be required related to the home for which the client seeks the mortgage loan. This paperwork includes

  • the purchase contract
  • a copy of the earnest money deposit check that was written for the real estate transaction
  • preliminary title report
  • proof of any insurance covering the house
  • an asset assessment

Further Documentation May be Required

Depending on the type of mortgage sought and other individual variables, further documentation may also be required.

  • Additional bank statements and pay stubs may be requested.
  • If self-employed or otherwise employed without a W-2, a business license or CPA letter may take the place of the W-2 requirement.
  • Some situations require documentations of a property appraisal.

Documentation Expected for a VA Mortgage Loan

If seeking a mortgage while in military duty, a Statement of Service and Certificate of Eligibility (COE) will be required.

For those not currently serving, a COE is still required; proof of prior military service will be required in the process of making the request for this documentation.

Additionally, the DD-214 is required for those not presently serving in the military.

How to Get Your VA Documents

The Statement of Service can be obtained by contacting the applicable commander, personnel office, or adjutant.

The lender may have access to the Automated Certificate of Eligibility (ACE) system, through which eligibility can be determined via an online application for the COE. Most lenders have access to this ACE system, although ACE can only process eligibility for people that the VA has enough personal information about.

If ACE does not work, then the COE can be obtained through submitting VA form 26-1880 with the request for this certificate to the Winston-Salem Eligibility Center.

Every person seeking a mortgage will need to go through a process that requires much documentation.

The specifics differ from one person to the next. Yet, enough consistency exists among mortgages in general, and especially among specific VA loans that this should help as a guide to know what is needed when applying and meeting with a lender.

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How a Renovation Loan for Home Improvement Works

Renovation LoanIf you want to make the move to a new home, you will first have to sell your existing property. You will naturally want to get as high an amount as possible from the sale of your home.

One of the best ways to add a significant amount to the resale value of your home is to take out a renovation loan.

How a Renovation Loan Differs from Other Types of Loans

There are several ways that a renovation loan differs from other types of loans. The chief difference is that most mortgage loans will offer you a financing arrangement that will enable you to borrow a fixed amount of money that is based on the price you paid for the property. Some loan arrangements will go a bit further by allowing you to borrow money based on the actual current market value of your property.

A renovation loan is superior to these other forms of loans in that it will allow you to borrow money based on the projected value of your home after you have completed the proposed improvements. This naturally gives you a higher figure to borrow money based on.

How Does This Type of Loan Usually Work?

In most cases, a renovation loan works similarly to other types of loan arrangement. The process normally begins with a single loan, followed by a single closing at the time the loan is paid off in full. The lender will advance funds to the contractor that you hire for the work. The money will be delivered in installments as each stage of the work is completed.

Purchase Renovation Loan

Home Improvement Loan

There are two very common varieties of renovation loan. The first is known is a purchase renovation loan. This type of loan is perfect for people who wish to begin the work after closing on the purchase of the property in question.

The loan can be provided for both the purchase of the property and the work that will immediately begin on it. A minimum down payment for a purchase renovation loan will usually be about 3 to 5 percent of the projected value of the home once the improvements have been made.

Refinance Renovation Loan

The second major type of renovation loan is known as a refinance renovation loan. It can also be referred to in some cases as a rehab loan. This type of loan is very similar to a purchase renovation loan, with some slight differences.

This loan is the perfect type of loan arrangement for people who already own the property that they desire to renovate in order to increase the value of. Under the terms of this loan arrangement, any prior financing that exists on the property an be paid off while additional funds for the work are provided. Depending on what type of renovations you qualify for, you can borrow up to 100 percent of the value of your home once the work has been completed.

How Do You Apply for a Renovation Loan?

We can help you with that! There are many different agencies that you may apply to in order to receive a this type of loan. Fannie Mae and the FHA both offer excellent refinance renovation loan programs. Contact us for more details.

 

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2018 Increase in AZ Mortgage Loan Limits

Have you heard about the three major changes  in mortgage loan limits affecting our housing market?

Mortgage loan limits in AZ have gone up for 2018 across the board on Conventional, FHA, and VA. Here’s the great news…

  1. FHA Loan limits have recently increased from roughly $279,000 all the way up to $294,515, expanding the housing market and the opportunity for you to find the perfect home.
  2. Conventional Loan limits have gone all the way up to $453,100. Why is that a big deal? Previously, if you were above $424,000, you would have been forced into the jumbo financing arena. Now this is not the case – once again allowing you to finance more and perhaps find that perfect home for you.
  3. VA Loan limits have also followed suit with regards to conventional financing, allowing a veteran to finance as much as $453,100 with no money down and no private mortgage insurance required. This makes VA Loans some of the most, if not the most, competitive financing terms available for Veterans in the housing market.
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Why You Need a Loan Specialist

Top Loan SpecialistPurchasing a home is a huge transaction and not one you want to enter into lightly. It can also be an exciting adventure particularly if it’s your first home purchase.

The excitement can quickly fall to the wayside, however, if you’re unfamiliar with the process and find yourself in over your head. Using a loan specialist can make all the difference.

Learn what a loan specialist can do for you and why it may be beneficial to have one when obtaining a mortgage.

What is a Home Loan Specialist?

A home loan specialist is a professional trained in the areas of finance, business and loans.

When you apply for a mortgage, you may find that there is a lot more to the process than you’d anticipated.

Depending on the lender, it can be a simple process, but are you getting the best deal possible?

A loan specialist can not only help get you through the process, but they can help you choose the loan that’s best for you and/or your family.

What many don’t realize is that there are different types of mortgage loans.

FHA Loans – FHA loans are loans that are backed by the Federal Housing Administration.

They do require that you purchase mortgage insurance, but also offer benefits. They typically offer lower interest rates and are available to borrowers with less-than-perfect credit scores.

FHA loans also require only a 3.5 percent down payment. They are an excellent option if you’re a first-time home buyer.

VA Loans – VA loans are mortgage loans available to veterans and their spouses.

They are backed by the Department of Veterans Affairs, so they are also attractive to potential homebuyers or homeowners interested in refinancing their current mortgage loans.

They’re also available to consumers with less-than-perfect credit. The best features of VA loans are that they do not require mortgage insurance and typically don’t require a down payment.

Conventional Loans – Conventional loans are mortgage loans you get through lending institutions like banks, savings and loan, credit unions and private lenders.

They may or may not require mortgage insurance depending if you have at least 20 percent down payment.

Credit scores, home values, down payments and debt-to-income ratios usually determine interest rates.

While conventional loans may appear to be the most unattractive of the three types, there are times they’re the best option. Here again is where a loan specialist can be of great service.

What a Loan Specialist Does for You

Since you’ll probably be making payments on your mortgage for anywhere from 10-30 years, you want to make sure you’re getting the best and most affordable loan.

A loan specialist will assist you with the following.

  • Completing and submitting your documentation
  • Going over the lending process with you
  • Helping you choose the right lender
  • Explaining loan terminology
  • Explaining the different types of mortgage loans
  • Helping you choose the right loan type
  • Assisting you throughout the entire process from the beginning and through the closing

Having a loan specialist working with you can make the difference of a complicated or easy transaction.

It can also leave you with the confidence that you got the best deal and are armed with the information you need regarding your mortgage loan.

 

 

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