Purchase contract

[Lawbound]

During the signing of a purchase contract my lender and the realtor had a heated exchange of words via cell phone. The realtor wanted to know on a deal with 100% financing, if any earnest monies were applied where would this money go considering that the seller would cover 6% (up to 3,200.00) of the closing concession back to myself. I hope that I am explaining this correctly.
A simple enough question that even I understood. He was coming from the standpoint of this being a financial matter and that being her background, she would be best suited to answer this question. Instead she asked him how long he has been in the business, so forth and so on.
.
My lender has a plan where I would have two loans at the same time. On a $70,000.00 house 1 loan would be around $58,000.00 and another loan would be taken out to cover the remaining amount.

After this exchange of words my realtor felt slighted and has since then tried to connect me with another lender all together.

My realtor thinks that 3,200.00 is steep and can be beat.
I have been working with my lender for 3 months and would like to think we have developed some sort of a relationship where she would look out for my best interest.

How common is this type of loan?
Is there anything in particular I should be looking out for in the form of pitfalls?
Should I consider my realtors suggestion.
I think I should also mentioned that this is the 3rd house I have brought to my lender, with the last two being shot down over-this-and-that- reasons.

[Dan Auito]

During the signing of a purchase contract my lender and the realtor had a heated exchange of words via cell phone. The realtor wanted to know on a deal with 100% financing, if any earnest monies were applied where would this money go considering that the seller would cover 6% (up to 3,200.00) of the closing concession back to myself. I hope that I am explaining this correctly.
A simple enough question that even I understood. He was coming from the standpoint of this being a financial matter and that being her background, she would be best suited to answer this question. Instead she asked him how long he has been in the business, so forth and so on.
.
My lender has a plan where I would have two loans at the same time. On a $70,000.00 house 1 loan would be around $58,000.00 and another loan would be taken out to cover the remaining amount.

After this exchange of words my realtor felt slighted and has since then tried to connect me with another lender all together.

My realtor thinks that 3,200.00 is steep and can be beat.
I have been working with my lender for 3 months and would like to think we have developed some sort of a relationship where she would look out for my best interest.

How common is this type of loan?
Is there anything in particular I should be looking out for in the form of pitfalls?
Should I consider my realtors suggestion.
I think I should also mentioned that this is the 3rd house I have brought to my lender, with the last two being shot down over-this-and-that- reasons.

Taking it from the top Lawbound, what does your lenders good faith estimate of closing costs say the final nimber is? Will it be say 3% of the $70,000 or about $2,100 in fee's usually lenders charge a 1% commitment fee, Appraisal fee (if seller doesn't pay) Credit report, origination and a few other sometimes junk fee's courier, certified checks, etc...

Since you will probably will not reach $3,200 in expenses any money that you deposited as earnest money would go directly to paying the mortgage balance down by that amount so If you put $1,000 down your loan is going to be $69,000 now.

You said the realtor thought $3,200 was steep, it appears that your seller has only agreed to cover that amount in the case that it did go that high, which it appears it would not, if indeed that is the figure the lender quoted and the sellers willing to pay it then who cares! Your not paying it and your getting 100% financing so tell the realtor to pack sand and to quit alienating your lender. )
In fact your realtor may be doing you a dis-service because if they the sellers agreed to pay upto $3,200 and the actual costs where only say $2,200 a good realtor would negotiate a new sales price based on the sales price being adjusted to $69,000 to take full advantage of the sellers agreed to concession)

These loans with a second mortgage are becoming more and more common as they allow you to avoid Private Mortgage Insurance (PMI) which only inflates your payments without reducing your actual loan amounts so yes avoiding PMI with this type of loan is often a good deal.

What are the respective loans rates being quoted, I'm pretty sure with todays competitive rates environment that they are relatively low.

I hope I understood this correctly, Dion/Luci Next :SM113:

[jpopkin]

is 3,200 the loan fees? That seems a little steep, but most lenders have a minnimum they like to make per deal. The big question is... If thats what they are charging on the front, what are they charging on the back? (If you dont know about back points, let me know, and I'll let you know.)

I would be surpised if the lender would allow 6% closing costs to be paid by seller if this is an investment property. If it is owner occupied, that might work.

What is it that you really want? Are you really trying to get cash back at closing? If so, there are several ways this can be accomplished. The most effective way is through "Buyer Rebates."

You have negotiated 6% closing cost and if the lender only allows 2 points, change the commision structure. Change the closing cost to 2%, and figure out the cash value of 4%. Then on a separate addendum write in that the buyers agent to recieve (his original commision+ the cash value of 4%) in commission. Make a change to your buyer representation agreement stating a buyers rebate in the amount of the 4%.

Now at closing, 2% closing costs are paid by seller. The buyer pays the remaining.. Then Selling broker recieves commission check, writes buyers broker a check, buyers broker writes buyer check. In the end you have cash back at closing that is not fraudulant.

Jason Popkin
RentalCashflow.com

Disclaimer: Check laws in your area. While buyers rebates are legal in my state, they may not be in your state.

[Dan Auito]

Sweet agreements there Jason! I'll second your motion! :SM117:

[Luci Marcum]

Lawbound,

Your type of loan (80/20) is extremely common. As Dan explained, it is so you do not pay PMI which in my opinion does not serve your better interests. Not to mention it is not tax deductible.

3200 may or may not be high depending on whether or not you are including tax and insurance reserves and how many days of interest you are being charged. Do you have a copy of the Good Faith Estimate provided to you by the lender? Please fax a copy to me (602-276-4753) so I can look it over and reply in this post what I see.

There are 2 sides to every story, but your realtor and lender should have not let themselves get to the point of heated words :smiley7: . As business professionals, they should both be looking out for your best interests while maintaining a professional attitude.

I am an ardent advocate that above all else, the clients should be taken care of ethically. Please fax the good faith to me so I can look it over for you :) .

[DionEvalueMortgage]

Excuse me today I am a little under the weather.

Everyone else has pretty much so gave you the correct idea. The loan sounds like an 80/20 (even though 80% of 70K is 56K). The real question here is that the right program for that small of a loan. There are lenders out there who will do one loan no MI. (Just food for thought)

I want you to take the closing costs and escrows from the bottom of your Good Faith Estimate and divide it by your total loan amount. There is your percentage of closing cost. Traditionally it should be somewhere in the mid 3% range.

Now on an investor property I can not imagine your lender is going to let you walk with money back. Your earnest money can be refunded if the seller's percentage is greater than that of the close costs. You would have to finagal the deal like the third dude said (sorry I forget his name). If your seller's percentage doesn't cover the closing costs and escrows then you pay the difference.

The earnest money is your money, if you want it applied to the loan you can do that or you can have it come back to you.

Your realtor sounds like they need to worry about being a realtor and let your lender worry about your money. :biggrin:

[karlpie]

Excuse me today I am a little under the weather.

Everyone else has pretty much so gave you the correct idea. The loan sounds like an 80/20 (even though 80% of 70K is 56K). The real question here is that the right program for that small of a loan. There are lenders out there who will do one loan no MI. (Just food for thought)

I want you to take the closing costs and escrows from the bottom of your Good Faith Estimate and divide it by your total loan amount. There is your percentage of closing cost. Traditionally it should be somewhere in the mid 3% range.

Now on an investor property I can not imagine your lender is going to let you walk with money back. Your earnest money can be refunded if the seller's percentage is greater than that of the close costs. You would have to finagal the deal like the third dude said (sorry I forget his name). If your seller's percentage doesn't cover the closing costs and escrows then you pay the difference.

The earnest money is your money, if you want it applied to the loan you can do that or you can have it come back to you.

Your realtor sounds like they need to worry about being a realtor and let your lender worry about your money. :biggrin:

**** I couldn't have said it better, Dion! That's why I stick with what I know as a realtor and let my professional network of lenders do the financing on the deals for me.