$ 700K and Down payment Assistance??

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Real Estate Agent with RE/MAX Realty Services

"Hi Audrey, I am calling to register an offer on your listing.  GREAT, I say.  Let's get together as soon as possible to work out the details."

When the offer comes in, I go over it with my sellers.  Always in a postive non-judgemental presentation, but this one befuddled me a bit.

It was for $700,000 and 6% towards closing costs and down payment assistance.  I know FHA goes up to $729,000 now, but I guess I would figure in that price range a buyer might have some cash saved up?  Please don't get me wrong, I don't care how you slice it or dice it if that works for the buyer and they can handle the payment, then by all means, but for someone with no cash reserves, that seems like an awfully big house payment?  

I have done a jumbo FHA this year for $560,000, with a closing cost credit, but not DPA.  It was a VERY difficult loan to do with a strong lender.  Seems like everyone, FHA is more conservative than before. 

My seller is actually the one that didn't like this scenario.  He sort of said isn't this the same thing, just a different tune of some of our troubles we are currently experiencing?   The offer did not get ratified for a couple of other reasons, but what are your thoughts, and have you had one of these deals at this price range? 

Lenders, what are your experiences with this?

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Rainer
331,895
Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru

Audrey, my first thought is that the buyer does actually have money saved but they need it for reserves to make the deal work. The second thought is that the lender/Realtor suggested DPA so that the borrower would not have to come out of pocket. The reason for this thought is the fact that they are asking for 6% seller consessions. All around, I think that the deal should have been thought through by the buyer and lender/Realtor.

Jul 18, 2008 11:29 AM #1
Rainer
27,714
Ken Graczak
Movement Mortgage - Eden Prairie, MN
Mortgage Advisor - Minneapolis / St. Paul

I agree...  Also, if they ask to put the intire 6% towards the DPA program like Nehemiah.  Then the buyers actual down payment will only be 2.25% instead of 3% because it looks like a gift from Nehemiah and not seller consessions.  It could be a way to save a little extra money.

Just a thought...

Jul 18, 2008 11:53 AM #2
Rainmaker
188,214
Audrey June-Forshey
RE/MAX Realty Services - Darnestown, MD
GRI, Gaithersburg, MD

Danny, I hope so.  It was a Nehemiah deal and I just remembered having such a time with the other jumbo FHA, maybe it was that particular deal?

Ken, I guess that is true.  I just think that payment - in my mind for an FHA buyer- is so high?  I guess they already spoke to the lender.

Jul 18, 2008 04:42 PM #3
Rainmaker
640,098
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Audrey, I have had a deal like that where they wanted the cash to buy furniture so who knows.  I guess that's a fairly good interest rate for furntiure shopping. 

Jul 18, 2008 05:16 PM #4
Ambassador
243,803
Jesse & Kathy Clifton
Jesse Clifton & Associates, REALTORS® - Fairbanks, AK
Fairbanks Alaska Real Estate Specialists, 907-328-9328

It would surprise me if they didn't have any cash reserves... at all, but perhaps they're just leveraging, if you will.  Why use your own funds when you can get it from the seller?  With that said our upper end buyer clients usually negotiate from the asking price rather than ask for concessions... but who knows.  I would hate to take on a $5,000 P&I payment with nothing to back me up. 

Jul 22, 2008 12:55 AM #5
Rainer
71,135
Jim Fischetti
The Fischetti Group/Keller Williams - Wake Forest, NC

Didn't you get the memo?

 

Buying a house is suppose to be like a car, you sign and drive. Money? What money?

 

What a world we live in, 700k and not a penny in it.

 

Jim

Jul 22, 2008 01:58 PM #6
Rainmaker
188,214
Audrey June-Forshey
RE/MAX Realty Services - Darnestown, MD
GRI, Gaithersburg, MD

Marchel, I just think it is weird to be able to afford such a high payment and not able to have some money in the savings account?  I guess you are right, maybe they are saving their money for something else.

Jesse, Yikes. If you have a $5000 a month payment and not much cash in reserves, don't you think that could be scary if you lost your job or better yet, maybe the economy might not be so good ??  Hhmm...  sounds familiar to me. 

Jim, It is the American way, buy on credit.  Gee, I thought real estate was supposed to be an investment?  We wonder why we have problems?

Jul 22, 2008 04:06 PM #7
Rainmaker
175,248
Rebecca Levinson, Real Estate Marketing and Online Advertising Consultant
Real Skillz-Clear Marketing for Your Real Estate Vision - Lake Geneva, WI

Audrey,

What a great question- ouch.  I suppose for those areas where the average sales prices is right around there (California) the raised FHA level makes sense.

I do wonder though, like you, about a first time homebuyer with no downpayment purchasing in the $700k range. I guess that could be a a family who makes a good income but spends a lot....

....but isn't that more of the same problem we have been facing over the past couple years?  Overextending and not making adjustments in our lifestyles?

Jul 31, 2008 05:00 PM #8
Rainmaker
188,214
Audrey June-Forshey
RE/MAX Realty Services - Darnestown, MD
GRI, Gaithersburg, MD

Rebecca, Amen.  You would think if you had the kind of income to qualify for that payment, you would have saved something??  I agree, that scenario is like take a step backward!

Jul 31, 2008 09:21 PM #9
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Rainmaker
188,214

Audrey June-Forshey

GRI, Gaithersburg, MD
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