Mortgage Options for Low Inventory
Happy Weds - I hope you are doing well and staying safe. Since inventory is so low, I wanted to share a few strategies we are using to help our clients win offers. Please see below and let me know if you have any questions.
21 Day Offer with No Contingencies – The most important thing clients need to do is get fully pre-approved. We have a lot of clients that start the loan application but don’t realize the urgency of getting us all of their documents to review. In my opinion, clients should not even start looking at homes until they are fully pre-approved. Once we receive all of their documents, we will review them with underwriting and put them in a position where they can make a 21 day offer with no financing contingency. In addition to that we have an option to do a rush appraisal and get the appraisal back in 5 days. This will allow the client to also remove their appraisal contingency and just do a 5-day due diligence. Lastly, please always let me know once you make an offer and I will call the listing agent to let them know how strong our client's pre-approval really is.
Appraisal Gap – If a client is putting down 10% or more, we will show them a mortgage option if the appraisal comes in low. If the client is buying a home for $400k and putting 10% down, then their down payment is $40k. If the appraisal comes in at $380k then we can switch them down to 5% down which is $19k and they can pay the additional $20k to the seller for a total of $39k. This will keep their cash to close the same and, in most cases, only move their payments by $50 - $70 a month.
Mortgage Recast – If a client has a home to sell and most of their down payment is in the equity of their current home, they can use our recast option. As long as they can come up with a 5% down payment and qualify for the home without selling then they can buy the new home with 5% down and once their other home sells, they can apply that money back to their new home and re-amortize their payment and get rid of PMI. (In order to do the recast, there is a onetime fee of $500. They have to make 2 payments and put at least $10k towards the mortgage.)
Bridge Loan – If a client has a home to sell and has no money for a down payment but has equity in their current home. They can get a bridge loan against their current property for the down payment. They will need to be able to qualify for both homes and the bridge loan. The bridge loan process takes about 3 weeks and cost approximately $2k in closing cost. NOTE: If they are doing this option, they need to get the bridge loan process started before they look at homes.
Ribbon (https://www.ribbonhome.com/) – I am doing one of these right now and is a great solution for some clients. This option seems to be a good solution for clients that are doing FHA or 3% or 5% down. Ribbon will allow the client to make a cash offer and as long as the client still closes with our mortgage it only costs them 1% to use this program.