Filed Under Buying, Selling · Tagged: Financing · Print This Article
The market is tough, it’s hard for buyers and sellers. With the help of my most trusted lender and some friends, I have a solution to recommend.
Sellers helping buyers buy their home, for less money! That is what I said. I have a few sellers that are ready to sell their homes! The word Motivated comes to mind.
They wanted to know what would help a buyer be more comfortable with buying their home in this difficult economy. Buyers, get ready to read and re-read this concept that helps you!
Basically, the sellers agreed to finance an interest rate reduction for the buyer. The way it works, is the buyer talks to the most trusted lender to qualify for a FIXED RATE loan. Then based on whatever FIXED rate the buyer qualifies for, the seller will pay money to reduce your rate 2% in the first year, and 1% in the second year, then in years 3-30 the rate is whatever FIXED RATE you originally qualified for. Please note this is NOT AN ARM. (With an ARM, you do not know what your rate will be when the arm’s time is up.) With this concept, you know what your rate will be, and the seller just helps you ease into your payments over the next 2 years. The cost is on the seller to pay this for you. Depending on the loan amount it could be $4-5K.
What does that mean to you?
Your mortgage payment would be hundreds of dollars less each month for the first two years.
Why would a seller do this for you?
To sell their house and help make it easier and less expensive for you to buy their house.
Why should you do this?
This buy down plan is designed for buyers to:
- Ease into a mortgage payment as a first time buyer
- When the buyer expects future salary increases, bonuses and promotions
- A spouse returning to or coming out of the work force for a year or two
- When you would like to save the extra cash
- When you would like to spend the extra cash on appliances or some other improvement or cost
- When you want more tax write offs. (Please consult tax professional)
- When you have a spouse in school, awaiting a degree or professional degree in which they will get a raise
How does it work, do you have an example?
Of course!
- Seller will pay to buy down your interest rate for the first two years of the Buyers loan on this house. The seller pays the cost of $4000 for the Buyer.
- The home is priced at $185,000, the payment amounts below include PITI (taxes, insurance, principle and interest) and MIP.
- The loan is based on an FHA loan with a down payment of 3.5%. Buyer must qualify with Wells Fargo to determine the Fixed Base Mortgage Rate.
The chart below is an example of a possible cost savings/benefit illustration:
Example
- Buyer is pre-approved and qualifies for a loan with an interest rate of 6%.
- Seller pays to reduce Buyers qualified rate from 6% to 4% for the first year. Monthly savings for buyer is $222, saving them $2664 for the first year.
- The $1217 monthly payment is a payment roughly equivalent to a loan amount of $144,600.
- Seller pays to reduce Buyers qualified rate from 6% to 5% for year 2. Monthly savings for the buyer is $114, saving them $1368 in year 2.
- The $1325 monthly payment is a payment roughly equivalent to a loan amount of $162,600.
- A total cost savings for the buyer in the first two years of $4000.
- Years 3-30: the monthly payment $1439 which is based on the contracted loan amount of $185,000.
- These buy down points that the seller will pay will amount to $4000 and will be paid in full at the time of closing and it is credited to the buyers HUD Statement.
This is NOT an ARM. This is a temporary rate reduction product with a FIXED RATE.PITI=Principle, Interest, Taxes and Insurance
MIP= Mortgage Insurance Premium
“I personally used this strategy for my first home in Hyde Park back in 2001. I started a pharmaceutical job where I knew I would be making bonuses and performance-based raises each year. I was comfortably able to get into the house of my dreams. After my first year’s performance on the job, I received a $6,000 raise and several bonuses which made the extra $125 increase of my mortgage in my second year a non-issue!”
-Amy Broghamer
For more information on this concept, contact Sharon Natarus at Wells Fargo 513-587-3524 or Sharon.Natarus@wellsfargo.com for questions or to qualify for a Fixed Base Mortgage Rate.
If you are looking for a Realtor that has creative and safe ideas in this difficult market, Contact Amy Broghamer, Realtor for any questions at 377-3637.
[...] buyers out there tempted by the lower home prices, and the encouragement of things like low rates, seller-funded point reductions, Federal $8000 first-time homebuyer credit and the Kentuckey Homebuyer [...]