Mortgage Blog

Some Strategies for Purchase & Purchase Loans

November 20th, 2010 2:59 PM by Eric Fang

I heard two stories last week about purchases.

The first one is from one buyer. She told me last week
that she made an all cash offer for a property of 690k,
but was surprised to find out that the property was sold
for 685k with a loan. The story behind this is that
another buyer offered for 740k, and the bank accepted
the offer; while working on the loan, the appraisal
value is only 685k, the buyer agent negotiated with
the bank to get the property for 685k. Is not great
for the other buyer? I think that agent is great.

The 2nd story is from another buyer. He told me that
he will take a look at one property this weekend.
For some reason, that property failed escrow twice
and just back to market again.

I don't know why the transaction failed. But It did
remind me about another transaction I just completed(
I mentioned in previous blog before). If the borrower
purchased the property as primary, the DTI will be too high.
So he could not qualify. So I suggested him to purchase it
as a rental(5000 sqft house). And he got the house with
such a good deal. The smooth tarnsaction is very important
for him.

I know there will be more buyers next spring. I hope
you guys all can get good deals with a smooth transaction.

Posted in:General
Posted by Eric Fang on November 20th, 2010 2:59 PM

is it a typo: 785K should be 685K
Posted by jane on November 21st, 2010 6:45 AM

Corrected. The buyer got it for 685k.
Posted by Eric Fang on November 21st, 2010 10:53 AM

why rental will qualify, but residential will not? this is contradictory?
Posted by KR on November 22nd, 2010 1:52 PM

Good Questions. The main problem is whether the borrower can use the rental income to qualify the loan. Fannie Mae does not allow you to use rental income from the current residence if the property does not have 30% equity. So if you purchase another primary, you have to have enough income to qualify both properties. For some cases, you don't qualify if the income is not enough. But if you purchase another rental, some lenders will allow you to use the market rental income to qualify the new purchase. That's why it's easier to qualify as rental. But if you have 30% equity in the primary, the lender will only allow to use the rental income for renting out the priamry when you can provide the lender with executable rental agreement, the proof of the security deposit, etc. But it's very hard to find a real tenant when you still live there.
Posted by Eric Fang on November 22nd, 2010 2:32 PM



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