I sold this home in Santa Clara for $711,000 to a very nice young couple buying their first home. They initially wanted to get an FHA loan and put as little of a down payment as possible, but also had the ability to go with a conventional loan as well. In my opinion, if you do have the down payment, it’s better to go with a conventional loan because FHA loans are more expensive than a conventional loan. In this case, it would have cost the buyers about $25,000 extra in this price range to get a FHA loan.
Since they did prefer to go with minimum down payment, they still went back and forth with FHA vs conventional. When we were looking for a home with their criteria, we were running into a lot of multiple offers. In multiple offer situations, it’s very hard to get a FHA deal through because sellers prefer not to work with FHA loans and if they have the option, and buyers with large down payments, the sellers will typically opt for a high downpayment buyer, even if it is not the highest offer.
For this home, there were 4 offers and I knew that if they wrote an offer with FHA financing, they would have no chance of getting the home because they were competing with buyers with 20% down payment. So, they did decide to opt for a conventional loan and make an offer with the stronger financing.
The sellers sent out a multiple counter to us and one other party for the price of $710,000. The buyers decided to try to seal the deal by offering an additional $1,000 and it worked! The listing agent told me that we did in fact tip the scale in our favor to get the home because we offered the extra $1,000. So, we were all strategy from the initial offer to finalizing the deal because they really wanted this home.
The stumbling block of this deal was quite stressful to the buyers and it was a really bad move on the banks part. Initially, they were preappoved, and I had the written letter, that they could put 10% as a down payment and get a conventional loan. I had the letter stating a loan amount over $650k and everything.
Well, just a couple days into contract, the lender came back with basically ‘my bad’ we can’t do a loan with 10% down over $625k loan amount. So, that put a REAL damper on things since we were already in contract and depended on the preapproval terms for the loan. Unfortunately, yes, banks can do that and do that kind of nonsense all the time. They make mistakes and are like “oh well”…the banks are the most frustrating part of my business.
So, it took 12% as a down payment to meet the guidelines for the conventional loan in this price range. The buyers discussed it and then decided to move forward with the sale. Then, the bank came back to us that the mortgage insurance company would not accept 12% as a down payment and wanted 15%! Now, this is WAY into our transaction when we thought all was good and moving forward. This was a total shock. Remember, these buyers initially wanted to put 3.5% as a down payment, then increased to 10% to avoid FHA fees and get a conventional loan, then told in contract the bank needed 12% down payment, and then all of the sudden, out of nowhere, the mortgage insurance company would not make the loan unless the bueyrs put down 15%.
Ok, that was really stressing on the buyers and for good reason, obviously. So, they thought about that scenario over the weekend and got back to me on Monday and wanted to move forward with the sale and put down the 15%. Luckily for these buyers they even HAD 15% to put as a down payment.
Once we got over all of that madness, it was a smooth transaction for the other aspects of the transaction. These buyers are also one of the lucky few who also qualify for not only the $8,000 Federal Tax Credit but also the $10,000 State Tax Credit. And, now they are very excited and happily in their new home after a roller coaster ride with the bank. But, at least we had a happy ending and up to $18,000 in tax credits!
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