I’m purchasing my first investment property. The seller agreed to $6000 cash credit for repairs, but now the lender is stating that the maximum credit allowed is 2% for an investment property. How can the seller compensate me for the difference of $700?
ask lender what it takes to buy down a 1/8 or 1/4 point of the interest rate. may not get there with $700, but that's usually the route I take because the purchase price is rather immaterial. Outside of that, ask for a new appliance :)
ask lender what it takes to buy down a 1/8 or 1/4 point of the interest rate. may not get there with $700, but that's usually the route I take because the purchase price is rather immaterial. Outside of that, ask for a new appliance :)
I’m purchasing my first investment property. The seller agreed to $6000 cash credit for repairs, but now the lender is stating that the maximum credit allowed is 2% for an investment property. How can the seller compensate me for the difference of $700?
What kind of repairs added up to 6000? That is pretty good..I thought most sellers these days are not offering anything
My lender also restricts me to 2% but there are ways around it. I was worried on my last one but it worked out that the sellers wouldn't be able to come out of pocket for repairs but they pulled through. My lender said if we had estimates we can have the escrow company write the checks in the name of the company doing the work so that I never have control of the money and it would not count as part of the 2%.
We're in a similar situation, Makeda, only it's a lot more than $700.
Unfortunately, in our case the seller's agent is holding up the close because lowering the purchase price will affect her precious comps. (Yes, she's nuts.) She's told the sellers they need to write us a cashier's check for the difference.
Feels like the Wild West out here. Just waiting for a gunfight to break out at the saloon.
ask lender what it takes to buy down a 1/8 or 1/4 point of the interest rate. may not get there with $700, but that's usually the route I take because the purchase price is rather immaterial. Outside of that, ask for a new appliance :)
Jeff, are you saying that the seller can contribute to the buyer buydown with the amount exceeding the 2% rule?
My lender also restricts me to 2% but there are ways around it. I was worried on my last one but it worked out that the sellers wouldn't be able to come out of pocket for repairs but they pulled through. My lender said if we had estimates we can have the escrow company write the checks in the name of the company doing the work so that I never have control of the money and it would not count as part of the 2%.
ask lender what it takes to buy down a 1/8 or 1/4 point of the interest rate. may not get there with $700, but that's usually the route I take because the purchase price is rather immaterial. Outside of that, ask for a new appliance :)
Jeff, are you saying that the seller can contribute to the buyer buydown with the amount exceeding the 2% rule?
I'm not saying anything other than to check with the lender about what's possible if there are extra seller credits available.
I think it's most likely the buyer should get an appliance or a home warranty out of the deal as part of the agreement. If underwriting is already saying the seller credits are capped at 2%, it is what it is. I have not heard of 2% being a cap for "investment properties", that seems strange to me but I dont' claim to have seen it all. @Tim Swierczek have you?
Perhaps consider having the seller purchase a home warranty. Old Republic or AHS are a few good options.
My experience with home warranty was a nightmare. I would rather pay for anything that needs fixing out of pocket than have to deal with one of those companies again. You will be lucky if they cover anything, they weasel their way out of every issue. We had them replace our microwave once and it took over 3 months and they had the absolute lowest bid of a company come out to do the work. Had people over the house 3 separate days about this microwave job. Lost time at work... awful.
ask lender what it takes to buy down a 1/8 or 1/4 point of the interest rate. may not get there with $700, but that's usually the route I take because the purchase price is rather immaterial. Outside of that, ask for a new appliance :)
Jeff, are you saying that the seller can contribute to the buyer buydown with the amount exceeding the 2% rule?
I'm not saying anything other than to check with the lender about what's possible if there are extra seller credits available.
I think it's most likely the buyer should get an appliance or a home warranty out of the deal as part of the agreement. If underwriting is already saying the seller credits are capped at 2%, it is what it is. I have not heard of 2% being a cap for "investment properties", that seems strange to me but I dont' claim to have seen it all. @Tim Swierczek have you?
6% for primary residence, 2% for investment property. Possibly more if you go Non-QM.
Perhaps consider having the seller purchase a home warranty. Old Republic or AHS are a few good options.
My experience with home warranty was a nightmare. I would rather pay for anything that needs fixing out of pocket than have to deal with one of those companies again. You will be lucky if they cover anything, they weasel their way out of every issue. We had them replace our microwave once and it took over 3 months and they had the absolute lowest bid of a company come out to do the work. Had people over the house 3 separate days about this microwave job. Lost time at work... awful.
Yeah, Home Warranties are notorious for that. I would never get one....
Is there a “safe/simple” repair the seller could do for you and charge to a credit card so they would have the money in their pocket from the sale before the bill was mailed? (A new appliance, a water heater, etc…)