Home Buying in 19154>Question Details

Slova, Home Buyer in 19154

I just placed an offer. My pre-approval shows me putting down 20%, although im approved well above my offer. Am i obligated to put down the 20% now?

Asked by Slova, 19154 Thu Jun 30, 2011

I was pre-approved for $300k as a second property. The offer i sent on a house indicates i am putting down 20%, even thought the lending institution requires that I put down atleast 5% (20% to avoid PMI). Am I now obligated to put down the 20%, or is that still negotiable with the lending institution. I would think they seller would care less...? Reason I ask it that i would rather put down 10% and have that much more money in pocket to put towards renovations, etc.

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If the lenedr only requires 5% down then that is really all that you need. The seller should not care what you put down. The seller may have accepted the offer becaue it was less of a chance for the mortgage company to decline you with 20% down and therefore the settlement would be smooth. I would put the pressuer on the mortgage company to make sure they have to cleared to close at least 3 days before the settlement. The seller can keep any earnest money that was put down on the contract if you should get declined because you were trying to obtain a mortgage that was not agreed to on the initial offer
0 votes Thank Flag Link Wed Jul 6, 2011
You should ammend the contract to let the seller know. I suggest that you get the new approval from your lender and present that with the change in terms. Hopefully the increased monthly payment and PMI payment will fit into your Debt-to-Income ratios.
I"m not sure if I'm reading this right but, you may want to verify with the lender that they are allowing you to purchase the property as a "Second Home" located in 19154. You may live in 19154 and buying a shore or mountain house.
0 votes Thank Flag Link Fri Jul 1, 2011
As long as you show up at the closing table with the total amount due you can do whatever you want, however if you fail to show up with enough money or if you get turned down for a loan because you're not putting the 20% down as indicated in your Purchase Contract, then you would be in breach of the contract and would forfeit your deposit and perhaps be open to further legal action by the Seller.

In short, show up at the closing table with enough money to close and no one cares.
0 votes Thank Flag Link Fri Jul 1, 2011
Hello Slova,

If your loan is approved nobody will care. If your loan is denied and you only applied for a 10% down product, you may not be able to invoke the mortgage contingecy clause in your contract,.

Also rather than paying monthly PMI you can save a considerably by paying one time upfront mortgage insurance. For example, paying either 1.4% upfront fee or 0.375% higher rate and you will not have to pay monthly PMI. You may find it suits your budget better. I'd be happy to quote you on that program.

Alan Openshaw
Cornerstone Lending Inc
Southampton Pa 18966
215 953 0800
cell 267 992 7276
0 votes Thank Flag Link Fri Jul 1, 2011
'Agreements of Sale' for real property include two basic components, both the Price and the Terms of the contract. You are proposing to change the Terms which can jeopardize your deposit. The seller certainly does care how you restructure your loan. Every seller simply wants to protect their interests to complete the transaction. Your new loan Terms may pivot the sale if the deposit is determined to be insufficient based on the condition of the property and the appraised value. The seller may then not have a sale. My recommendation is to attempt to reach out and change the Terms with the seller's written approval.

Charles Balducci 215.531.2000

Coldwell Banker Preferred (Avenue Arts)
0 votes Thank Flag Link Thu Jun 30, 2011
speak to your mortgage lender and agent...that being said, provided that you close, most sellers don't care what financing you get. ...the problem comes if you are turned down for a programyou want but are approved for one which is in the contract.
0 votes Thank Flag Link Thu Jun 30, 2011
Just a heads up- FHA 203k renovation mortgages are for primary residences only. No second homes. Regarding the contract and wanting to change down payment amounts- consult with your Realtor as they would know best if the seller would have any issues- but rule of thumb would be you should be fine.
Web Reference: http://www.nj203klender.com
0 votes Thank Flag Link Thu Jun 30, 2011
To add to Marge's point - the 203 is missing a letter to become a type of FHA loan, there is a 203b (which is FHA's regular version) and the 203k (the rehab version). There is also the Fannie Mae HomeStyle Renovation loan program and the Fannie Mae HomePath Renovation program too (HomePath.com listed properties only), along with proprietary construction/rehab loan programs from various banks. While you can get extra funds for financing by using those programs, all of those will tie you into a construction rehab schedule which you may or may not want to adhere to for your own reasons, plus if you didn't disclose that rehab type of financing in the first place it may violate your contract as well (I am not sure what your contract looks like).
0 votes Thank Flag Link Thu Jun 30, 2011
You ARE obligated because it us written into the contract. The Seller DOES care and may have based his accepted of your offer at least partially on that fact as the more you put down, the more it shows you are able, qualified, serious, etc. That said, I agree with Gregorio that they should be OK with you changing it to 10%, but you MUST amend the contract in writing (signed by all parties) or you will be in breach if contract.
Web Reference: http://www.FamousEric.com
0 votes Thank Flag Link Thu Jun 30, 2011
You can get whatever type of financing you like unless it's written into your contract. I doubt that they would care if you put 10% or 20% as long as your loan funds. Check your contract and let your agent know what you plan to do. From a lending point of view, it won't make a difference, but you will need to go through underwriting again to make sure the new ratios qualify.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Jun 30, 2011
Putting 20% down will save you from paying PMI. Ask your lender about FHA 203 loans. If they don't do them, call around and find a bank that does. They let you roll the fenovations into the mortgage.
0 votes Thank Flag Link Thu Jun 30, 2011
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