Preapproval letter with $0 in the bank while using seller credits (WA)
Member since 2021 · 3 posts · 3 votes
Preapproval letter with $0 in the bank while using seller credits (WA)
Most Popular Reply
Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votesQuote from @Delaney Mizell:
I am buying my 2nd live and flip (~300k) and want to use another 3% down conventional, I also plan to get 4-5% back in seller credits at closing meaning I will need maybe 1% of purchase price in my bank at closing after all is said and done.
I am using a loan officer right now who is not the best and says that I will need to prove I have atleast 6% (~20k) to get a preapproval letter.
Is this a hard stop for preapproval or can a good loan officer make it work knowing I am getting seller credits ?
To use 97% financing with a CONVENTIONAL loan as a non first time homebuyer you would have too make under 80% AMI in your zip code. You can find out where you stand here: https://sf.freddiemac.com/work...
Secondly, with a loan to value over 90% you would be maxed at 3% seller credit.
You would be better off with a FHA loan for the lowest cash into the deal, but if your current loan is an FHA that would be a roadblock.
Hurst Real Estate, INC4.991 Reviews
6 Replies
- 3yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Delaney Mizell:
I am buying my 2nd live and flip (~300k) and want to use another 3% down conventional, I also plan to get 4-5% back in seller credits at closing meaning I will need maybe 1% of purchase price in my bank at closing after all is said and done.
I am using a loan officer right now who is not the best and says that I will need to prove I have atleast 6% (~20k) to get a preapproval letter.
Is this a hard stop for preapproval or can a good loan officer make it work knowing I am getting seller credits ?
To use 97% financing with a CONVENTIONAL loan as a non first time homebuyer you would have too make under 80% AMI in your zip code. You can find out where you stand here: https://sf.freddiemac.com/work...
Secondly, with a loan to value over 90% you would be maxed at 3% seller credit.
You would be better off with a FHA loan for the lowest cash into the deal, but if your current loan is an FHA that would be a roadblock.
Hurst Real Estate, INC4.991 Reviews - Member since 2021 · 3 posts · 3 votes3yWow thank you so much for your answer.
Quote from @Jay Hurst:
Quote from @Delaney Mizell:
I am buying my 2nd live and flip (~300k) and want to use another 3% down conventional, I also plan to get 4-5% back in seller credits at closing meaning I will need maybe 1% of purchase price in my bank at closing after all is said and done.
I am using a loan officer right now who is not the best and says that I will need to prove I have atleast 6% (~20k) to get a preapproval letter.
Is this a hard stop for preapproval or can a good loan officer make it work knowing I am getting seller credits ?
To use 97% financing with a CONVENTIONAL loan as a non first time homebuyer you would have too make under 80% AMI in your zip code. You can find out where you stand here: https://sf.freddiemac.com/work...
Secondly, with a loan to value over 90% you would be maxed at 3% seller credit.
You would be better off with a FHA loan for the lowest cash into the deal, but if your current loan is an FHA that would be a roadblock.
Now I absolutely know my loan officer is horrible as they didn't mention any of this.
1. I am making way above 80% AMI as of this years paychecks but am below the line on last years tax returns, so i wonder if that will make a difference, My officer said he could make it work but now I dont trust him at all.
2. No one else has told me this either, a previous loan officer said the max was based on area and I was capped at 6%, so a max of 3% changes everything.
I was currently advised into conventional since I have high credit (760) but maybe Ill look into FHA or just ultimately wait a few months and not get a negative down deal.
Thanks very much for the help and advice - Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes3y
@Delaney Mizell- thanks - 1) seller credits cant be used for down payment funds ...only can be used for loan fees/ closing costs and prepaid taxes / interest / insurance 2) with 3% down program - there is a limit to how much the seller credit can be so check this with your lender 3) down payment can be gifted in most cases .....you will likely need to have some funds in place
- Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes3y
Live in flip is the way to go! Just sold mine, (lived in it longer than anticipated. Bought for $207k and sold for $425k after about $50k rehab over the years. The appreciation in WA (atleast my area) is still going strong!
- 3yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Delaney Mizell:
Wow thank you so much for your answer.Quote from @Jay Hurst:
Quote from @Delaney Mizell:
I am buying my 2nd live and flip (~300k) and want to use another 3% down conventional, I also plan to get 4-5% back in seller credits at closing meaning I will need maybe 1% of purchase price in my bank at closing after all is said and done.
I am using a loan officer right now who is not the best and says that I will need to prove I have atleast 6% (~20k) to get a preapproval letter.
Is this a hard stop for preapproval or can a good loan officer make it work knowing I am getting seller credits ?
To use 97% financing with a CONVENTIONAL loan as a non first time homebuyer you would have too make under 80% AMI in your zip code. You can find out where you stand here: https://sf.freddiemac.com/work...
Secondly, with a loan to value over 90% you would be maxed at 3% seller credit.
You would be better off with a FHA loan for the lowest cash into the deal, but if your current loan is an FHA that would be a roadblock.
Now I absolutely know my loan officer is horrible as they didn't mention any of this.
1. I am making way above 80% AMI as of this years paychecks but am below the line on last years tax returns, so i wonder if that will make a difference, My officer said he could make it work but now I dont trust him at all.
2. No one else has told me this either, a previous loan officer said the max was based on area and I was capped at 6%, so a max of 3% changes everything.
I was currently advised into conventional since I have high credit (760) but maybe Ill look into FHA or just ultimately wait a few months and not get a negative down deal.
Thanks very much for the help and advicethe AMI is based on your qualifying income which would be your current income. and the interested party contributions is based on loan to value not area. But you cannot use IPC to pay your down payment anyway. It can only cover closing costs/pre-paids.
Hurst Real Estate, INC4.991 Reviews - Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes3y
Quote from @Delaney Mizell:
I am buying my 2nd live and flip (~300k) and want to use another 3% down conventional, I also plan to get 4-5% back in seller credits at closing meaning I will need maybe 1% of purchase price in my bank at closing after all is said and done.
I am using a loan officer right now who is not the best and says that I will need to prove I have atleast 6% (~20k) to get a preapproval letter.
Is this a hard stop for preapproval or can a good loan officer make it work knowing I am getting seller credits ?Hi Delaney, a few thoughts:
-Seller credits cannot be used towards down payment. They can be used towards closing costs and rate buy downs.
-You may want to look into an FHA loan if you don't already have an outstanding FHA loan. Better rates and the monthly PMI rates dropped from 0.85% to 0.55% of the loan balance annually.
-How long do you plan to live in this home? One thing to keep in mind is if you sell the home within 90 days, you will not be able to accept an FHA offer. If it sells between 91 to 180 days to an FHA buyer, the property will require two appraisals.
Just a few things to keep in mind! Great strategy though. If you ever need help in the Snohomish County area, let me know!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.