Home Buying in Burnsville>Question Details

Wannabe Buyer, Home Buyer in 55337

Trying to buy foreclosure, want to use incentive program, being told not to... please advise?

Asked by Wannabe Buyer, 55337 Wed May 13, 2009

I am making an offer on a foreclosure, however the city it is in has a foreclosure purchase incentive program that involves down payment assistance. I would like to try and take advantage of it, but I am being advised not to. Here are the reasons I am getting:
1) From Agent: If you complicate your offer by including that program, the selling bank will just ignore your offer in favor of another. (This I totally buy)
2) From Lender: It would be very difficult to get your loan approved with the inclusion of this program (which is essentially an interest free forgivable loan). Why should it be so difficult if the city is going to subordinate and simply improve the CLTV for the lender?
2) From Agent: If you don't include it in your offer/PA you can't change it later... IE include that program or change lenders if the lender can't make the program work. If a commitment to a lender/financing isn't in the PA, and the sale is funded anyway, what does the seller care/ have recourse for?

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Susan Hofflander’s answer
As for how it impacts your presentation of the offer to the seller, your agent is correct. Sellers are accepting your offer based on the information you provide. In the offer, you are indicating what type of loan you intend to secure. With your pre-approval letter, you are indicating what lender you have already decided to use to secure what loan you've committed to in the purchase agreement. By virtue of supplying this info (which is virtually a must these days), you are allowing the sellers access to finding out what type of qualifying this loan officer has done to determine your worthiness to obtain a mortgage. If the seller is satisfied with that lender's explanation of things and feels good about entering in to a transaction with you based, in part, on that information, when you change that path mid-transaction, it can be perceived as not adhering to the terms initially agreed upon.

Don't forget, when you sign a purchase agreement in MN, you've committed to make mortgage official application within 5 days of the acceptance of the purchase agreement. If you're not even sure about your loan officer or your loan before you write the purchase agreement, you can't possibly make application that quickly. If you want to pursue that program, why don't you go on the website of people providing the program to see what loan officers they suggest. Those people will most likely be well versed on the terms of the loan and easily be able to determine if you qualify.

As for foreclosures, they just want to know it's going to go through. So, the fewer questionable things you do, the better your chances of getting your offer accepted.
1 vote Thank Flag Link Wed May 13, 2009
1 - All things being equal, yes your offer will be less attractive with that program as a stipulation. Rarely are 2 offers identical though. If you offer more than the next guy, they might be interested in the hassle. Cash buyers sometimes pick up the best deals since the bank likes to see no financing contingencies.

2 - Banks are very tight today on lending and they look over everything with scrutiny. Most of these city programs eventually get approved but the approval process can take time.

3 - The financing terms of your offer include the type of financing and the lender being used. Changing those later is somewhat a bait-and-switch thing, but it depends on the purchase agreement language if you are allowed to make those changes or not. If you write the offer needing this program and don't get it you will often lose your earnest money if you fail to close.
1 vote Thank Flag Link Wed May 13, 2009
Your agent is correct assuming the REO is aggressively priced.

On these aggressively priced properties the bank has a selection of offers to choose from..the most attract offer being cash & the least attractive being more difficult loan scenarios with numerous hurdles. The bank wants a quick sale & doesn't want the deal to fall apart because of a snag in financing.

Your offer is not only competing with others on price but also on the likelihood of it closing...and/or the ease of it closing.
0 votes Thank Flag Link Wed Mar 3, 2010
A question, is this an incentive program with Burnsville, Dakota County? If you can let us know the name of the program, it will help us better answer your question. Thank you!
0 votes Thank Flag Link Wed May 13, 2009
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