The Unique Real Estate Blog

Unless you plan on paying cash for your new home, which is highly unlikely, you will need to obtain a mortgage. Typically, any offer to purchase real estate is contingent upon the buyer’s ability to obtain such financing. Therefore, it is expected that the seller have a right to examine the details of the financing so as to ensure adequate monies are available to consummate the transaction. These details are important to the seller so as to enable him or her to ascertain the probability that you will be able to obtain financing.

Typically you should expect to provide the amount of the cash down payment you have available. The larger the down payment as a percentage of the purchase price, the greater the likelihood that the buyer will be able to obtain financing. This is because a large down payment provides added security for the lender and makes the transaction more attractive and subject to less scrutiny than might otherwise be required. Large down payments can additionally assist a buyer in overcoming challenges in credit history or current income.

However, including financing contingencies in an offer also serves to protect the buyer, as well as the lender. For example, the inclusion of a maximum allowable interest rate allows the buyer to back out of a transaction if an acceptable mortgage offer cannot be obtained. Factors which could cause an interest rate to be higher than the buyer is willing to pay include market fluctuations, credit challenges, and other risk factors as determined by the lender.

However, the seller will also want some “wiggle room” with regards to the interest rate. Insistence on a low or unreasonable interest rate, or an interest rate that does not allow for normal market fluctuations, might not serve to provide adequate assurance for the seller to take his or her home off the market. It is important for all parties to be reasonable. The purpose of defining a maximum allowable interest rate is to prevent a transaction from occuring in the event of some abnormal condition. It is not intended to force unrealistic terms into a transaction.

Other financial details may be included as well, which may come in the form of seller incentives. These can range from the seller paying a portion of the closing costs, to the seller providing additional monies for a down payment, to improvements in the property prior to its transfer. Whether or not a seller is willing to make these concessions is, of course, up to each individual seller. However, as with any negotiation, a concession in one area makes it less likely to achieve concessions in other areas, such as price. If you are in need of some assistance at the time of the transaction, and are willing to pay for it in the long run, this is perfectly acceptable, and all such terms should be included in the offer and agreed to by the parties.

Any terms involving seller financing and mortgage insurance should also be included. Seller financing in the form of a second mortgage on the house may be able to avert the need for mortgage insurance. In such a scenario, the terms of the second mortgage should also be clearly spelled out in the offering document. This would include whether or not payments are interest only or also involve principle amounts, and the duration of any interest only payments.

Cash offers should be tendered with proof of liquid assets demonstrative of the fact that you are in possession of liquid capital sufficient to purchase the property.

Other mortgage terms should also be included, such as whether or not the mortgage is a fixed rate or variable rate. Special financing programs, such as first time buyer’s programs, FHA loans, and the like, should also be mentioned.

About the Author:

Catherine Nguyen was born and raised in Dallas, Texas and is a licensed real estate agent. Ms. Nguyen specializes in Dallas real estate and has a career with Renowned Realty Group – Dallas/Ft. Worth RE/MAX.

Catherine Nguyen was born and raised in Dallas, Texas and is a licensed real estate agent. Ms. Nguyen specializes in Dallas real estate and has a career with Renowned Realty Group – Dallas/Ft. Worth RE/MAX.