Low down payment program, seller credit enable home purchase

Mortgage broker: Sheila Perez, Holmgren & Associates.

Property: Condo in Concord.

Purchase price: $355,000.

Loan amount: $344,350.

Loan type: 30-year fixed-rate loan,

Rate: 6.99%.

Backstory: My client wanted to buy her first home, a condominium unit in Concord. The main constraint was a common one for first-time home buyers: very low available funds for down payment and closing costs.

To start with, I used a Fannie Mae loan program that allows a down payment of 3% (rather than 5%). This change alone saved the buyer over $7,000 in cash to close. However, for the process to be successful for the unit the buyer had identified, it was also important to obtain a credit from the seller for closing costs and a sale price that would still enable the buyer to qualify at today’s high (by recent historical standards) interest rates.

Home sellers are usually amenable to giving credits to buyers provided that they are achieving a high enough net sale price (after credits) to meet their needs. In this case the sellers were willing to work with the buyer but needed to achieve a minimum net sale price to meet their financial needs, in this a situation involving needing funds to transition a relative into assisted living.

From the standpoint of the buyer’s loan process, seller credits are permissible provided that the property being purchased appraises for the contract sale price, which includes the seller credit. This can be challenging, particularly with condominium units, because the “comps” that are used in the home appraisal typically have to include comps within the condominium project, sales that may not have occurred at the same price level as the property now being purchased.

This is in fact the problem that we had here. The property appraisal came in at $340,000, well below purchase price.

My client didn’t have the ability to come up with the extra funds to make up this difference. Instead, I worked with the buyer’s agent, LaDonna Azagra with Compass Real Estate, to prepare an appraisal rebuttal request.

This is a mechanism that is available to lenders in these situations. We can do our own analysis of comparable property sales to make the case that the contract purchase price is wellsupported by market data. While these efforts are seldom successful, in this case the appraiser reconsidered the value conclusion and ultimately agreed that our sale price was justified by market data.

This transaction was a good example of the challenges that can arise unexpectedly in today’s real estate market, requiring a cooperative effort between lender, real estate agents, buyer and seller to help home buyers achieve their dreams of homeownership.