As home sales slow, prices erode, and rates increase, mortgage assistance by sellers for buyers can help cushion the impact of these market shifts, bridging the gap between what owners want or need and what buyers are willing to pay. With Seller Concessions buyers can score a better deal at closing. Here’s how it works.

What are Seller Concessions?

Seller concessions, sometimes referred to as Interested Party Contributions (IPC) or ‘Seller Assist’, are when a home buyer asks the home seller to pay some or all the costs on the home buyer’s behalf to reduce the amount of cash they need at closing.

These costs include:

• Homeowner’s Insurance
• Property Taxes Due at Closing
• Escrow Account Set Up
• Pre-paid Interest
• Attorney/Settlement Agent Fees
• Discount Points

The purchaser may request seller concessions during contract negotiations, or the seller may offer a concession during the listing process.

Example:

Let’s say that the agreed sales price between a buyer and a seller is $200,000. The buyer needs an additional $7000 to cover their closing costs and prepaids such as: taxes, insurance, and escrows.

The buyer then asks the seller for a credit of $7000 to be given at closing. The sale price of the house then increases to $207,000. The buyer receives the credit of $7000 at the time of closing and the seller still nets the agreed upon price of $200,000.

However, there are stipulations: 1) the home must appraise for a sale price of $207,000 and 2) the buyer must pay an increased down-payment based on the increased sales price, e.g., conventional 5% down on $200,000 is only $10,000 while 5% on $207,000 is $10,350.

But understand, the seller isn’t really paying your closing costs – you are mortgaging them.

Seller concessions are allowed on all major loan types, including conventional loans backed by Fannie Mae and Freddie Mac; FHA loans backed by the Federal Housing Administration; VA loans backed by the Department of Veterans Affairs; and USDA loans backed the U.S. Department of Agriculture.

Are There Limits to Seller Concessions?

Yes, there are limits to Seller Concessions. You cannot request unlimited seller concessions. Depending on the buyer's loan type, seller concessions are capped to a specific percentage of the loan size. For instance:

• Appraised property value must support the concession
• Limits apply based on loan product and program
  • FHA = 6% of sales price
  • A conventional loan = 3% seller concessions for loans with LTVs greater than 90%, 6% for loan LTVs between 75-90% (owner occupied/2nd home); 9% for loan LTVs less than or equal to 75%
  • Investment properties are capped to 2% of the purchase price
• Eligibility requirements, exclusions and other terms and conditions apply

Can a Seller Buy Down the Interest Rate for the Buyer?

Discount points can temporarily or permanently buy down an interest rate. Sellers achieve a buydown by paying money upfront to the buyers’ lender in exchange for a reduction in the interest rate. The lower rate on a permeant buydown continues for the life of the loan.

How do Seller Concessions Benefit the Buyer?

For the buyer, being able to finance closing costs into the mortgage allows them to place a larger down payment which in turn saves them money on their monthly mortgage payment. For those with limited funds, the number of properties available increases. If a seller offers to pay discount points, the buyer will have a lower mortgage rate.

Why Would a Seller Agree to Concessions?

In a competitive buyers’ market, a house with a seller concession can be more attractive to a buyer. If a homeowner needs to sell quickly, seller concessions can help to expand the pool of qualified borrowers able to purchase the property.

Bottom Line

If you're looking to buy and don't want to pay closing costs or are looking for a lower rate, seller concessions are a good way to reduce the amount you'll need at your settlement. If you are uncertain whether your desired seller concessions fall within your loan guidelines, then check with your Greenway Mortgage professional to plan for those steps.

 

When it’s time to buy a new home, it helps to know not only where you want to live, but also what type of home you’ll choose.

From single family homes to condos and townhouses, each property type has unique characteristics to understand before you buy.

Below you’ll find the differences between seven common property types. After reading through each you’ll have a better idea of which one best suits your lifestyle and needs.

Let’s start with Single family homes.

Single Family: 

A single-family home, or stand-alone house, is the most common and popular type of home. Some single-family homes are in subdivisions or communities that fall under the governance of a homeowner’s association (HOA). If applicable, buyers should become familiar with the HOA's rules and covenants prior to deciding to purchase.

Ownership is by deed, and you own the land, the dwelling, additional structures, and any improvements made to them.

Multi-Family: 
Multi-family housing can refer to anything from a two-family home up to an apartment building with hundreds of units.

Ownership is by deed. Typically, one owner will hold the deed for the land, all units, and any additional structures, common areas and amenities. The owner will often occupy one unit and lease the remaining units to renters. Conventional residential financing is available only on properties up to 4 units. Additional units typically require commercial financing.

Condo: 

Condominiums, or condos, can take many forms but are typically residential living units like apartments.

Ownership is by deed. Rather than owning a building and the land, you own only your unit and a percentage of the common areas like hallways, the grounds, and amenities.

P.s. If you’re buying for the first time, condos make a great first choice!

Co-Op: 

Co-ops (cooperatives) are similar to condos in that they are usually like an apartment unit. More rarely, there are versions more like single family homes.

However, the ownership is unique. Rather than having a deed, you own shares appropriated to an individual unit, including an interest in the common areas and amenities.

Townhouse:

A townhouse is one unit in a series of attached city rowhouses where dividing walls can be shared. The term can also refer to the style of home rather than to the type of ownership. The style is often part of a condominium community.

Ownership of a true townhome property type is by deed, which will describe the exact bounds or dividing lines and land owned. The experience will typically be similar to owning a single-family residence.

Townhouses are another great option for first-time buyers!

Land: 

Land, often called a lot in residential areas, is property with no structures. Land is easier to finance when you plan to use a construction loan to build a home on it.

Ownership is by deed. Many residential lots are in subdivisions that have a homeowner’s association (HOA). If applicable, buyers should become familiar with the HOA's rules and covenants prior to deciding to purchase.

Commercial: 

Commercial properties are designated for business uses, including retail, services, offices, etc. Financing is different than for residential properties.

Ownership is typically by deed, but commercial properties can also be part of a condo association.

Bottom Line:

If you have questions about properties or any aspect of home financing, please reach out. The Greenway Team is here and ready to help!

 

 

The Annual Percentage Rate (APR) is not the rate you pay. Homebuyers will often believe the lowest annual percentage rate (APR) is the best.

In fact, it's more important for buyers to weigh options against their personal financial situation and the amount of time they plan to have the loan.

Low APRs typically come with the highest cost, and those funds can often be better deployed against larger down payments or, in some instances, paying off high-rate consumer debt.

Here's a quick overview of what an APR is and how to calculate the costs and/or savings that accompany a lower one.

What is APR?

APR is not the interest rate that you pay. It’s a government-required calculation intended to show the total cost of borrowing, expressed as an interest rate.

The APR is derived from a formula using these two factors:

1. The actual rate and term of your loan
2. Certain closing costs that are associated with your loan

Again, it is not the rate you actually pay. Click here to see how APR actually works. 

APR is best used as a tool for comparing loans with dissimilar terms. Where APR is lower, associated costs of closing your loan may actually be higher. Keep in mind that the calculation assumes you'll keep your loan for its full term. Few people ever see the 5th year of their home loans these days, much less the 30th. 

APR will be lower on a loan where you pay more “points” to lower the interest rate. But if you don’t hold the loan long enough to earn back the points paid up front, that money will be wasted. If APR were calculated for the average amount of time borrowers actually have their loans instead of the full term, it would be higher. Comparisons would be more helpful and less potentially misleading.

Bottom Line:

APR is intended to give you more information about what you're really paying. 

Any time you or someone you know has questions about interest rates or any aspect of home financing, please reach out.

The Greenway Team is happy to help! Reach out to us today.

 

 

 

Is the home you want out of reach?

In a time of rising rates and prices, the home you really want may be out of reach with the typical fixed-rate loan.

But stretching further isn't really much of a stretch at all with an ARM—an adjustable rate mortgage. If you're skeptical, be assured they've changed for the better over the years.

Here's How Adjustable Rate Mortgages Work:

1. Most ARMs are hybrid. They are fixed for a period of time, usually 5, 7 or 10 years, before being subject to adjustments.

2. During the initial period, rates (and monthly payments) will typically be lower than those offered by fixed-rate loans.

3. Interest rate caps can keep future adjustments predictable.

For example, a 30-year loan of $300,000 could have a payment savings of over $183 per month with an interest rate that's 1% lower. A loan such as a 5/1 ARM may offer this kind of payment savings.

Is An ARM Right For You?

ARMs aren't for everyone, but hybrid ARM loans can offer years of fixed principal and interest payments.

They work especially well if you plan to sell or refinance before the adjustments occur.

Click below to estimate the payment and savings a hybrid ARM can offer, as well as income required to qualify.

 

If higher rates and prices are keeping you from the home you really want, it is worth a look to see the difference an ARM loan may provide.

Please reach out, and we'll be happy to help.

 

If you’ve purchased your home with a down payment lower than 20% of the purchase price, you’re likely paying each month for private mortgage insurance (PMI).

We’ve got all the details on PMI, why you need it, how it’s paid, when you can cancel, and more.

What Exactly is Private Mortgage Insurance?

Private Mortgage Insurance, also called PMI, is a type of insurance you may be required to pay for if you have a conventional loan. PMI protects the lender if you stop making payments on the mortgage loan.

PMI is not to be confused with Homeowner’s Insurance, which is required and protects the physical home and property.

When is Private Mortgage Insurance Required?

PMI is required when a borrower has a conventional loan and makes a down payment of less than 20 percent on the price of the home, they are buying. However, if a borrower puts down more than 20 percent, PMI is not required.

Take into consideration the same thing for a home refinance. If you refinance with a conventional loan and your equity is less than 20 percent of the value of the home, PMI is usually required. Speak with your lender for more information.

How Do You Pay for Private Mortgage Insurance?

In most cases, mortgage lenders will roll PMI into your monthly mortgage payment as a monthly premium. Other times, PMI can be paid for as a one-time up-front premium which is paid at closing. Your loan estimate and closing disclosure documents will specify the amount of your Private Mortgage Insurance.

When Can You Cancel PMI?

The good news is that you will not have to pay private mortgage insurance forever. It can be canceled once your loan-to-value (LTV) falls below 80 percent of the home’s original appraised value. Sometimes this can happen sooner if your home’s value appreciates before then.

How Do I Cancel My PMI?

As we noted above, you may be eligible to cancel your PRMI when your equity reaches 20 percent. Your Private Mortgage Insurance will fall off automatically once you reach 22 percent equity. However, if you’re at 80 percent equity, want to be proactive, and save some money, you can reach out to your mortgage lender and request that they cancel your PMI. Your lender will advise on the necessary steps to take to cancel PMI.

If you’re not quite at 80 percent equity in your home, continue to make your mortgage payments on time each month.

Mortgage Tip: Have extra cash for a month? If so, put that money toward your principal to build your equity even faster. Be sure to make a note to your lender that you want the extra payment to go towards your principal balance and not your next mortgage payment. This can easily get confused or overlooked otherwise.

Is The Time Up on Your PMI? It’s Time to Find Out!

Use our PMI Removal Calculator to find out if you’re eligible to drop PMI and, if not, how much further you may need to go before you get to that point.

If you have any questions along the way about canceling PMI or home financing in general, please reach out. We are happy to help.