concessions to bring a buyer to the table. Please make sure you check
with an experienced mortgage consultant regarding the impact these
concessions will have on the ability to finance the home before
publishing them in your listing.
One such idea that is sometimes mentioned in listings is a seller
contribution towards a buyer's future mortgage payments. This is called
a 'Payment Abatement' and is frowned upon in the guidelines of all of
the major lending programs available in the market today. It is
considered an enticement to purchase and the effective purchase price
used to determine the loan amount will be reduced by the amount of the
payment abatement. In other words, if you have a payment abatement for
$6,000 from the seller, the buyer's required down payment will be
increased by $6,000, defeating the purpose of the concession in the
first place. You can do a payment abatement, it's just not effective.
This does not mean there are not creative ways to help bring buyers to
the table. There ARE large seller concession options that play well
with mortgage financing guidelines. For example, most loan programs
allow sellers to contribute up to 6% of the sales price towards the
buyer's closing costs. Standard closing costs on a purchase tend to be
between 2% and 3%. That leaves an additional 3%-4% that can be used a
number of different ways to reduce the buyer's mortgage costs over time.
Both temporary and permanent rate buy down options are available. In
today's rate environment that could put the buyer into a mortgage in the
mid to low 4% range, perhaps even less! This would help them afford the
home for years into the future, not just a few months.
If you have questions or would like additional information on this issue
please feel free to contact me.
Theron Wall, Sr. Mortgage Consultant
Certified Mortgage Planning Specialist
Wallick & Volk Mortgage Lending
3615 Crossings Dr, Ste A
Prescott, AZ 86305
Cell (928) 533-7473
Office (928) 778-7167
Fax (928) 445-5308