Some things are out of the buyers control. A 100% cash offer at the asking price is always the most attractive offer to a seller. If there is none, then the next best thing is whichever offer has the highest down payment. This is where the problem lies for a buyer that is only able to make a very small down payment. In a hot market where there are multiple offers, you will run into trouble and have a hard time finding a seller that will accept your offer if you are making a low down payment. A FHA loan with the minimum 3.5% would be a prime example.
The reason a low down payment is less attractive than a higher down payment is because with a low down payment the seller sees more potential for complications and because that’s just the best way to pick the most attractive offer if they are receiving the same asking price from a few different buyers. There are other factors of course but money is always the main one.
One thing that might come up is the loan to value that a lender is willing to lend and the buyer will have to make up for the rest. With that in mind, a higher down payment gives the buyer more wiggle room.
The reason a low down payment is less attractive than a higher down payment is because with a low down payment the seller sees more potential for complications and because that’s just the best way to pick the most attractive offer if they are receiving the same asking price from a few different buyers. There are other factors of course but money is always the main one.
One thing that might come up is the loan to value that a lender is willing to lend and the buyer will have to make up for the rest. With that in mind, a higher down payment gives the buyer more wiggle room.
If you are in a slow market or neighborhood then it is no big deal having a low down payment because the seller will have no other choice. Your offer is probably the only one that has been made on the home so they will just have to accept your offer either way and take their chances.
This really goes back to clients that ask me how much down payment they should make. There really is no definite answer and the best way to approach it is the higher the better because it makes your offer that much more attractive and you will have a lower mortgage payment.
This really goes back to clients that ask me how much down payment they should make. There really is no definite answer and the best way to approach it is the higher the better because it makes your offer that much more attractive and you will have a lower mortgage payment.
Originally Posted On THURSDAY, MAY 17, 2012
No comments:
Post a Comment