FUNDS TO CLOSE for FHA
With the extreme ups and downs of the current market, I know many of my clients are wondering how they are going to get the funds needed to purchase a home. But within the FHA guidelines, there are many alternatives. ***Some of these FHA guidelines may have additional investor and industry restrictions so verification per loan is necessary.
As we approach the end of the year, there are many people who are wondering if they should scramble to buy a home now or wait until early next year. Whether your client decides to purchase now or wait, it is prudent that you meet with them to determine how much and from where they are going to get their down payment and closing cost funds. Below are just 3 of the 22 Important Ways to know well ahead of the closing date before your client starts shopping. Make your transactions smooth sailing from start to finish by being knowledgeable from day 1.
- Collateralized Loans~
Funds can be borrowed for the total required investment as long as satisfactory evidence is provided that the funds are fully secured by investment accounts or real property. Such assets may include stocks, bonds, real estate (other than the property being purchased), etc. We can also use funds that have been borrowed against collateralized assets such as a car, boat, etc.
In addition, certain types of loans secured against deposited funds, such as signature loans, the cash value of life insurance policies, loans secured by 401(k)s, etc., in which repayment may be obtained through extinguishing the asset; do not require consideration of a repayment for qualifying purposes. However, in such circumstances, the asset securing the loan may not be included as assets to close or otherwise considered as available to the borrower.
An independent third party must provide the borrowed funds. The seller, real estate agent or broker, lender, or other interested third party may not provide such funds. Unacceptable borrowed funds include signature loans, cash advances on credit cards, borrowing against household goods and furniture and other similar unsecured financing. - Sales Proceeds~
The net proceeds from an arms-length sale of a currently owned property may be used for the cash investment on a new house. A fully executed HUD-1 Settlement Statement must be provided as satisfactory evidence of the cash sales proceeds accruing to the borrower. If the property has not sold by the time of underwriting, loan approval must be conditioned upon verifying the actual proceeds received by the borrower. The lender must document both the actual sale and the sufficiency of the net proceeds required for settlement. - Sale of Personal Property~
If the borrower intends to sell personal property items (cars, recreational vehicles, stamps, coins, baseball card collections, etc.) to obtain funds required for closing, the borrower must provide a satisfactory estimate of their worth, in addition to conclusive evidence the items have been sold. The estimated worth of the items being sold may be in the form of published value estimates, such as those issued by automobile dealers, philatelic or numismatic associations, or a separate written appraisal by a qualified appraiser with no financial interest in the loan transaction. Only the lesser of this estimate of value or the actual sales price is considered as assets to close.
All is not lost however simply because you or your client does not have enough savings...stay tuned for info. on trade equity, 401(k), employers guarantee plans, sweat equity and so much more.
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