Fast Market Mortgages
Just as your Berkshire Hathaway HomeServices network professional wants you to be successful in your quest to buy a home, so does your mortgage lender, which means being ready to compete in a fast market.
A good lender will get you preapproved for a loan before you make an offer to buy a home. There’s really no way to speed up this process, so it’s best if you start now. Your lender will need time to run your credit, check your employment history, and see what loans you can get and for how much.
You may find a home you want to buy, but in a fast market, sellers know they have the advantage. They may refuse to consider FHA, VA or other conforming loans because they don’t want to go through the more rigorous appraisal process. Sellers may ask that you make your highest and best offer by a certain date, which is often over list price. You’re competing with all-cash buyers and 20-percent – down buyers, so consider shopping for homes under your highest price range.
Communicate often with your lender. Send them the MLS numbers of the homes you’re interested in. They’ll tell you what you need to offer, how much you’ll need to put down, and how high you can go, as well as provide a preapproval letter for the seller to accompany your offer. For example, something like HOA fees will raise your monthly debt and impact how much home you can buy.
Merry Christmas, homebuyer! Don’t cash Mom and Dad’s check yet! Your loan could be denied if the money isn’t carefully documented.
Why? Gifts can cause confusion. Is your parents’ money a gift or a loan? Unless the terms are clearly defined, don’t mix the gift with your own funds. It alters your bank statements and raises your income both of which could muddy your financial picture.
Lenders require a paper trail for all monies, so no phone deposits. They also limit the size of gifts in relationship to the total down payment. Some loan programs require the borrower to contribute at least 3% to 5% of the down payment if the down payment is less than 20%, while other programs allow the entire down payment to be supplied by a gift.
To avoid questions, provide a certified down payment gifts letter or sign an affidavit that explain:
- The amount of the gift, accompanied by a corresponding cashier’s check, including a photocopy of the check
- The name and address of the gift-giver and relationship the gift-giver has to the homebuyer
- The purpose of the gift – to be used only as a down payment on the subject property, complete with the property’s address
- A statement confirming that the gift is not a loan, and does not need to be repaid
- Signatures of the borrower and the gift-giver
If you’re planning to use a gift as part or all of your down payment, ask your realtor how to meet all the appropriate requirements regarding down payment gifts.