The Accunet Mortgage Show (8/2/2020) Episode

Brian and David revisit a past client affected by the 2008 financial crisis, help a young couple navigate a tight buyer’s market, and outline some tips to help the couple present a winning offer.

This week’s highlights:

  • Buying a condo can be an undertaking, but Accunet can get you in the door
  • Contingencies, loans, and credit, oh my!
  • Writing a winning offer is still possible, even in a strained homebuying market

A Condo Catastrophe

This week, Brian was proud to help out a past client that Accunet tried valiantly to assist 12 years ago.

The client’s original consultation with Accunet was precarious due to some hangups caused by Fannie and Freddie.
Back in 2008, as the economic downturn was brewing, this client was trying to purchase a condo from a development company that had 35 units set to be built, but the recession sent the company belly-up – with 12 units still unfinished.

Fannie and Freddie knew that if a new developer swooped in to obtain the condo project, they would likely buy it at a bargain price, build out the last 12 units, and sell them for a lot less than what the original tenants had paid for them.

Neither Fannie nor Freddie would lend for this client’s mortgage back then with the condo project on the line, only offering him an adjustable option. In order to secure financing from a government-sponsored enterprise in a development scenario, 90% of any unfinished units must be sold or closed for posterity’s sake.

If Accunet would have assisted the client back then, he would have had to push for an appraisal waiver, which was hard to come by, and if an appraisal had to be done, the unfinished units would have come to light and pinged the banks.

Fast forward to last week, and the client is now nearing his retirement and hoping Brian could secure a lower monthly mortgage payment option after the refinance.

Brian first suggested a 20-year-fixed at the current 2.99% rate, with a 2.77 APR – which would lower the client’s payment by $13/month, and after factoring in loan costs, he would end up with $8,500 net savings over time.

While tempting, the client asked what a 30-year-fixed would do for him. Brian said that by extending out his loan even another 10 years, he would save $212 in monthly payments, with an interest savings of $5,400.

The client, satisfied and secure, opted for the 30-year refinance, and was glad he called Accunet a second time around!

Curious about all the ups and downs of condo financing? Accunet offers a full guide on the condo buying process.

A Losing Situation

In a second client story this week, Brian talked about a father scrambling to assist his daughter and son-in-law sell their home in this tight market.

The young couple have $60,000 in equity in their current home and are looking to purchase a house in the Sussex/Menomonee Falls area.
However, as we discussed last week, with rates so low and demand so high, there is currently only ONE home without an offer in that area.

The son-in-law and daughter have already gone to the mortgage company that is affiliated with the realtor for this house, hoping to make a winning offer.

Unfortunately, in this competitive market, the young couple had a few things against them:

1.) Home Sale Contingency
The offer they wrote for the house was contingent on the sale of their current home. With dozens of other potential buyers waiting to pounce, the seller can reject their offer just because their current home may not sell in a timely manner to leverage their offer.

2.) FHA Loan Option
The only financing they qualified for was an FHA (Federal Housing Administration) loan. Meant for moderate-to-low-income borrowers, FHA loans require an upfront premium (1.75% of the loan amount, usually out-of-pocket), are subject to approval (weighing down their offer progress), and if the appraisal comes in at below the asking price, the seller must modify to adhere to FHA guidelines (making buyers with conventional loan options more appealing.)

3.) Financial Hiccups
The son-in-law has a low (650) credit score, and due to COVID, the daughter went from being a W2 employee to a self-employed 1099 contract employee, so her income is off the table; causing their financial situation to look quite shaky to both lender and seller.

Looking for ways to qualify for the best home loan with a lower credit score? Read Accunet’s FAQs about paying off cards.

A Winning Offer

So what can this poor couple do to push through a winning offer?

1.) Let dad help!
The father volunteered to get involved as a buyer along with the son-in-law to improve the weight of the credit scores, write a cash offer $25,000 over the asking price, and propel their offer to the top of the pile.

2.) Fix credit scores!
The couple could also opt to use some of the gift money to pay down the balances on their credit cards, giving an immediate boost to their credit scores.

3.) Nix the inspection and appraisal contingency!
By giving the seller more breathing room to avoid amending defects and closing the gap between appraisal and offer, the couple will be more likely to beat out similar offers with more provisions laced into their offers.

Have questions about mortgage options during times of change? Accunet can help!