Financing in Scottsdale>Question Details

SZ, Home Buyer in Portland, OR

If I got a conventional loan for a condo, is it possible to have the seller pay the 20% closing & I factor that 20% in the total loan

Asked by SZ, Portland, OR Thu Feb 3, 2011

amount/purchase? Got approved for FHA loan, however the properties that are FHA approved I am not happy with. I'm a first time home buyer, 680ish credit score and the issue I have is really just the 20% down. The properties I like are way below the amount I was approved and am comfortable paying each month, however paying that 20% is way above what I can do. So basically I'm asking if it's possible to have the seller pay that 20% and I pay it back in the total purchase price? Does it matter if it's a short sale/foreclosure/etc? Also what other options do I have available? I wouldn't mind paying more in total costs if that meant the 20% down was taken care of.

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You are confusing Down Payment with Closing Costs. Closing Costs are the fees and expenses you incur for obtaining a loan and escrow costs for transferring title. Down Payment is your portion of the purchase that you use to reduce the loan to value.

Sellers can pay closing costs on your behalf, Sellers cannot pay your Down Payment because that would just be a reduction in the purchase price. If you add the 20% to the purchase price the home will not appraise.

Also, FHA (and most banks) require your Down Payment to come from the Buyers personal funds (or from a gift from a family member).

The other thing that you are confused about is "properties that are FHA approved I am not happy ". Most properties (with exception of a few condos or manufactured homes) are FHA approved. You did not specify the type of property you are looking at, but there are many different lending programs available, especially for owner occupied homes. One of them should work for you.

You need a good lender and a good agent to guide you.
1 vote Thank Flag Link Thu Feb 3, 2011
Yes it is possible however PLEASE CHECK WITH YOUR LENDER. Obtaining a loan right now is very hard, especially on Condos and most of them DO NOT QUALIFY for FHA. Talk with your lender but as far as asking for concessions, you can do that or your agent can do that on the 9 page Arizona Purchase Agreement.

Best of luck.
0 votes Thank Flag Link Fri Feb 4, 2011
Oh! I see. Sorry - I'm a first time home buyer, so I've been figuring allll this out all within the last few days. Totally makes sense, thanks again!
0 votes Thank Flag Link Fri Feb 4, 2011

Many of the comments have clairfied the issues pretty well. FHA and or Home Path may be your best options.

What if you adjust your criteria for buying some, open the area up a little? I found a great house yesterday for a couple for only $85,000 and the HOA is only $33 a month in a small gated community. Sharp move in ready and has a small backyard.

Just a couple of thoughts for you.

Doug McVinua

Arizona Homes for Sale by a Guy from Iowa
Web Reference:
0 votes Thank Flag Link Thu Feb 3, 2011
Hi. Well Leyla, it's a good idea, but it won't fly. Seller's can only contribute to your actual closing costs and your down payment is not considered a closing cost. In terms of a short sale or foreclosure, it doesn't matter.

It sounds to me like you may have been mislead a bit when you were approved for your loan because your lender should have made you show that you had the 20% down ready to go. If they didn't, well I would suggest you find a more reputable person to work with. It also sounds to me like you should consider finding an experienced, real estate professional to help guide you. It's free to use agents as a buyer because the seller pays their fee.

If I can be of further help, don't hesitate to contact me..
Web Reference:
0 votes Thank Flag Link Thu Feb 3, 2011
OK, we know rolling the 20% into to the purchase price is not acceptable. So what are the options?

You have a credit score that is ok to to get a loan (above 640). If you have documented income (W-2 or 1099s) and can prove you will have a job for the next 2 years you can borrow.

You want a 0% down payment. That means a VA loan or USDA loan (see for more info. The USDA loan is geographically limited to out lying areas like Queen Creek or Buckeye (note they are redrawing the map based on the last census so this loan may not work very often in the future). There are 1% options from some lenders-ask about these programs. FHA requires 3.5% down.

Part of the issue may be that your condo is not qualifying for FHA or any other loan because it has more than 50% landlord owners. This will be an issue for all lenders. You can seek owner financing, but they normally want large down payments and high interest. Another reason a property may not qualify for an FHA loan is the property is not habitable (missing bathroom, missing kitchen, --ie. a fixer)

Consider townhouses as they may not have so many landlord owners and could qualify for loans. Pick a Buyer's Agent that can help you pick and chose based on your needs. A good buyer's agent can recommend lenders that will help better define your loan requirements so you can pick a place that meets your needs and that of the lenders.

0 votes Thank Flag Link Thu Feb 3, 2011

The seller is not allowed to do what you are asking. Unfortunately. Unless you find a private hard money lender that doesn't care. They can structure the loan anyway they want. The problem with this is that they usually get a much higher interest rate and want you to refinance within a year or two.

The Homepath financing is a great way for you to go as is it a conventional loan (Fannie Mae) and is good for owner occupants, second homes, or investors. This definitely helps because there are many condo and townhomes that don't qualify to get a FHA loan. The homepath loan program also does not require an appraisal (which will save you money upfront) and there is no mortgage insurance required (which will save you money every month).

The Homepath financing is probably easier that the NACA, but both may be options for you. You will want to speak to a lender that is familiar with this type of financing.

If we can be of further assistance, please contact us!

Best Regards,

Brenda and Ron Cunningham
602-980-3133 / 602-499-0694
Recognized in the Phoenix Business Journal as one of the Top 50 Realtors in the Valley. (July 2010)
0 votes Thank Flag Link Thu Feb 3, 2011

I love it.

It IS possible in a way. But not the way you propose. You need someone to owner finance to you and thus forego the 20% down requirement. The best way to create what you lack - equity - in a property, is when you buy.

Thats why the most important thing when buying a house - and working with a real estate professional - is there knowledge of value and creating it when you buy.
0 votes Thank Flag Link Thu Feb 3, 2011
Leyla ther is a name for what you have propsed. It is called a builder bail out scheme. The idea behind it is that you tell the lender that you have put your 20% down and inflate the price to cover it that way the seller nets the asking price of the property. Here is a link from Freddie Mac about it and it is considered fraud.
0 votes Thank Flag Link Thu Feb 3, 2011
I think you need to talk to a loan officer. Most loans will only let the seller pay 3-6% of closing costs. Home Path would be another method, if you can find an approved property.
0 votes Thank Flag Link Thu Feb 3, 2011
You do have few choices and Homepath is one of them and NACA is another. The great thing about NACA is that you could come in with no downpayment and any type of condo is approved. But you have to be approved for the program. It is better if you are introduced to them by your realtor. You might have to attend a meeting but it is worth it.
Tooraj Bakhtiari
REMAX Excalibur Realty
0 votes Thank Flag Link Thu Feb 3, 2011
You should look at Homepath properties. You will only need 3% down, and no mortgage insurance or appraisal is needed.

These are homes owned by Fannie Mae that they want to sell off their books and thus offering very advantageous financing.

Check properties that qualify here

We are an approved Homepath Lender, contact me if I can help
0 votes Thank Flag Link Thu Feb 3, 2011
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