What to ask the Buyer’s Lender before Completing a P&S

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Thanks to Board Legal Counsel Mike Shepard and our fantastic Affiliate Lenders for providing insight and guidance about some common areas of confusion when completing the Purchase and Sale agreement.  Want to know what to ask the Buyer’s Lender before Completing a P&S?  First, you should identify the mortgage type (Conventional / Governmental) and then call the lender and ask:  [Printable Flyer]

What is the minimum time frame to close a loan today?

  • Today the typical time frame is: 30-40 days from ordering the appraisal on conventional loans or 45-60 days on VA/USDA
  • Variations: lender process, loan type and market activity can change the time frame – you should ask first!
  • Time Frame estimates are expected to INCREASE by 10-15 days in August 2015 after regulation changes take place

Do you charge a Mortgage Application Fee?

  • Some charge an application fee (non-refundable), others charge a closing fee paid at the closing.
  • Give buyer time to determine if the home is acceptable before owing non-refundable fees.
  • If there is an application fee, the mortgage application date should be one day after the home inspection date.

Do you call for an appraisal immediately upon receipt of the Mortgage Application?

  • Once a lender orders an appraisal, the buyer must pay for it, regardless of if they buy the home or not.
  • Give buyer time to determine if the home is acceptable before owing appraisal fees.
  • If appraisal is ordered immediately upon application, then the mortgage application date should be one day after the home inspection date.

What Closing Cost Credits can my buyer quality for with this type of loan?

  • Typical Closing Cost Credits are 3% for conventional loans, but credits can go as high 5% for USDA.
  • If the lender doesn’t allow the full dollar or percentage amount that you’ve written into the agreement….
  • Buyers can lose money! Read / understand the closing_cost_credit flyer and ask the lender first

Does the lender include any physical repairs in the calculation of a closing cost credit?

  • Some lenders include physical repairs in the calculation of closing cost credits
  • If repairs are included, the amount of credit available to pay for settlement costs is less.
  • Therefore, if seeking closing cost credits you shouldn’t assume you can add repairs credits as a separate item and get the full dollar value of both.

Does the lender allow you to escrow for post-closing repairs, if applicable?

  • Some lenders do not allow sellers to escrow for septic systems
  • Some lenders are not allowing escrow of funds for certain physical repairs (such as roof replacement).
  • You should know what repairs you are allowed to escrow for, since it varies by lenders.

Finally, don’t ignore the Insurance Application
date that you’ve written into the contract.

Have the Buyer apply IMMEDIATELY for Property Insurance to determine if it is in a flood zone, and what the expense will be. There is NO COST to ask an insurance agent to determine if a property is in a flood zone, and this can avoid costly mistakes or closing issues.  See our Flood_insurance_flyer for details.

Information featured at the Industry Luncheon on April 2, 2015