If your buyer is needing to borrow more than $417,000 to finance the purchase of your home read this before you sell

By
Real Estate Broker/Owner with Respect Realty LLC 200311024

When you purchase a home that the loan required to finance the purchase is more than $417,100, this is called a jumbo mortgage and is a higher risk to a bank. This means that a home requiring a jumbo mortgage also comes with higher interest rates.

This $417,000 limit is set by Freddie Mac and Fannie Mae and, presently, with a down payment and great credit, the best interest rate you can get is 7.13% with no points according to bankrate.com. What does this mean to you, if you are selling your home?

If you have a home that is valued at over $417,000, it means your pool of buyers is dropping everyday the interest rates climb. And if you own a home valued at over $417,000 and it is a non conforming home, such as a manufactured home on it's own land, then it will almost be impossible to find a buyer that will be able to obtain financing through traditional means.

I can show you a way that you can not only sell your home, in days, for full price, but make more money than you could if you sold your home through traditional means.

Owner financing! If you owned your home outright and it appraises at $500,000 and you were to offer your $500,000 home at 7% interest, you could make an extra $34,000 in the first year alone. You see, you get the interest instead of the bank and you don't have to worry about the buyer being able to obtain a traditional mortgage.

For more information on how to sell your home with owner financing, please feel free to contact me anytime.

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Oregon Washington County Beaverton
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jumbo loans and what it means to you when selling your home

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Rainmaker
64,648
Barry Shapiro
Broker-Associate - Camarillo, CA

Hey Todd ~

Great approach to thinking outside the box.  It's a win-win solution for buyer & seller.  Only downside is if the prices continue to decline and the seller is forced to take the home back.  They'll be entitled to keep the deposit, but they may lose another $50-100K or more (depending on the area) in the downturn of the market.  For the same reason, a lease with option-to-buy scenario can hurt both buyer and seller.

Aug 26, 2007 04:14 PM #1
Ambassador
2,075,766
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Barry - We are lucky here, prices haven't started to fall yet and most who are in this situation have had the homes long enough they are making money no matter what! Unlike the banks the seller doesn't really have any overhead (Unlike a bank) and if the person buys the home for $500,000 @ 7% intestest the seller would make $170,248 in interest during the first 5 years! Even if they have to take the house back after 5 years they can then sell the home for $330,000 and still break even. Not a bad deal if you think about it this way.

Aug 26, 2007 04:21 PM #2
Rainer
16,435
delete me delete me
delete me - Dixon, CA
Owner financing would be a great thing to get into. Make the easy money just like the banks. That only works though, if the people buying the house don't tear it up and then default...
Aug 26, 2007 05:19 PM #3
Rainmaker
64,648
Barry Shapiro
Broker-Associate - Camarillo, CA
There are definite upsides and downsides for both sides.  There are tax consequences, too.  I would give both parties all your information, and suggest they each consult an attorney and tax professional.  Unfortunately for the home-buyer, the regular payment history is not reported to the 3 credit bureaus or on their FICO, so they will need to "prove" it later if they want to take advantage of that credit reference.  Should interest rates on CD's climb over 8% in the next several years, the sellers won't have access to their funds.  Also, should a cash emergency arise, the sellers will need to "borrow" their own money from a conventional lender.  Carefully executed, your scenario can be very beneficial.
Aug 26, 2007 05:33 PM #4
Rainer
96,751
New Jersey Real Estate James Boyer Morris, Essex & Union County NJ Realtor
RE/MAX Properties Unlimited, Real Estate - Morristown, NJ

You may want to revise a little,  It is not the value of the home being over $417,000 it is if the buyer is going to finance more than $417,000.  Just went though this with my own purchase.   Home was much more than 417K as most homes in NJ are, but borrowed 417K and did not have to get a Jumbo loan or have to pay the higher interest rate.

 

Jim

Aug 26, 2007 05:37 PM #5
Rainer
218,617
James Gordon
Sibcy Cline Realtors® - Cincinnati, OH
REALTOR, PBD SFR SRS
Todd James is right it is the loan value not the home value that determines a Jumbo loan.
Aug 26, 2007 11:15 PM #6
Ambassador
2,075,766
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Rondell - It isn't easy, but it is worth it!

Barry - I have everyone I deal with owner financing on talk to an account and a lawyer before proceeding. The taxes are the big one!

James and James - I will revise the blog today! Thanks for catching that, because you are right. That is what I get for writing a blog at 10pm!

 

Aug 27, 2007 12:10 AM #7
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