Seller Paid Contributions by Home Loan Type

Sellers can contribute to a buyer's closing costs, however there are limits of how much depending upon loan type.

Seller paid costs are also known as sales concessions, seller credits, or seller contributions. Whatever you want to call them, new and experienced home buyers can get into homes faster with help from the seller.

Seller Contributions by Loan Type
Maximum Seller-Paid Costs for Conventional Loans

Conventional Loans
Property Type	Down Payment	Maximum Seller Paid Costs
Principal Residence or Second Home	Less than 10%	3%
	10%-25%	6%
	25% or More	9%
Investment Property	Any Amount	2%

Seller concessions can be used for some of the following: 

• Prepayment of property taxes and insurance

• Appliances and other gifts from the builder

• Discount points above 2% of the loan amount

• Payoff of the buyer’s judgments and debts.

• Payment of the VA funding fee

Why Set Maximum Seller Paid Closing Costs?

• You paid too much for the home.

• Similar homes in the neighborhood will start selling for more if the cycle is repeated.

• The bank’s loan amount is not based on the true value of the home.

Each loan type has slightly different rules when it comes to seller contributions.

Fannie Mae and Freddie Mac are the two rule makers for conventional loans. They set maximum seller paid closing costs that are different from other loan types such as FHA and VA.

While seller paid cost amounts are capped, the limits are very generous.

For all FHA loans, the seller and other interested parties can contribute up to 6% of the sales price or toward closing costs, prepaid expenses, discount points, and other closing costs.

If the appraised home value is less than the purchase price, the seller may contribute 6% of the value.

The seller may contribute up to 4% of the sale price, plus reasonable and customary loan costs on VA home loans. Total contributions may exceed 4% because standard closing costs do not count toward the total.

USDA loan guidelines state that the seller may contribute up to 6% of the sales price toward the buyer’s reasonable closing costs.

Seller paid costs fall within a broader category of real estate related funds called interested party contributions or IPCs. These costs are contributions that incentivize the home buyer to buy that particular home. IPCs are ok up to a certain dollar amount, but above that they are not allowed.

Who is considered an interested party? Your real estate agent, the home builder, and of course the home seller. Even funds from down payment assistance programs are considered IPCs if the funds originate from the seller and run through a non-profit.

Anyone who might benefit from the sale of the home is considered an interested party, and their contribution to the buyer is limited.

Mortgage rule makers such as Fannie Mae, Freddie Mac, and HUD aim to keep the housing market fair and keep values and prices sustainable.

Seller contributions may not be used to help the buyer with the down payment, to reduce the borrower’s loan principal, or otherwise be kicked back to the buyer above the actual closing cost amount.

While seller contributions are limited to actual closing costs, you can constructively increase your closing costs to use up all available funds.

Imagine the seller is willing to contribute $7,000, but your closing costs are only $5,000. A whopping $2,000 is on the line. Use it or lose it.  In this situation, ask your lender to quote you specific costs to lower the interest rate. You could end up shaving 0.125%-0.25% off your rate using the excess seller contribution.

You can also use seller credits to prepay your homeowners insurance, taxes and sometimes even HOA dues. Ask your lender and escrow agent if there are any sewer capacity charges or other transfer taxes or fees that you could pay for in advance. Chances are there is a great way to use all the money available to you.

All government-backed loan types allow you to prepay funding fees with seller contributions.

FHA. FHA loans require an upfront mortgage insurance payment equal to 1.75% of the loan amount. The seller may pay this fee. However, the entire fee must be paid by the seller. If you excess seller credit, but not enough to cover the entire upfront fee, you cannot use the funds toward the fee.

VA. The seller can pay all or part of upfront fee of 2.15% – 3.3% of the loan amount. The fee counts towards VA’s 4% maximum contribution rule.

USDA requires an upfront guarantee fee of 2.0% of the loan amount. The buyer can use seller contributions to pay for it.

Seller contributions and other interested party credits reduce the amount of money it takes to get into a home.

Zero-down loans such as USDA and VA require nothing down. However, using these loans involves closing costs so you can be prepared.  A seller credit can remove the closing cost barrier and help buyers get into homes for little or nothing out-of-pocket.

To see if you qualify to buy a home with zero down and low out-of-pocket expense,

Contact us Today! www.iLendLasVegas.com

Many home shoppers are surprised that they not only qualify, but initial homeownership costs are much lower than they expected.

Tax Ramifications of Real Estate Investment for Foreign Buyers

The first foreigner to have ever bought a real estate property in the United States was Peter Minuit. This opened the doors to foreign real estate investors. After a couple of centuries later, foreign real estate investment has grown into huge proportions, accounting for billion-of-dollar worth of industry.

The low risk attached to US real estate market, the availability of countless properties, and the steady market liquidity attract foreign investors in droves. The initial snag, however, is the process of understanding the legal ramifications of foreign real estate investment.

What you have to understand is that foreign investment in the United States can take a lot of forms. A foreigner has various options. He can acquire direct interest. He can acquire an interest in the real estate through a partnership, a corporation, or a limited liability company. The latter is the typical structure used by foreign investors.

Limited partnership or Limited Liability Company offers financial protection or indirect asset protection, especially in cases of bankruptcy, law suits and taxes. Foreign investors are generally taxed on the property as if they hold the property in direct interest.

Ideally, you should secure the services of a real estate accountant to help you out with the tax ramifications, but it would help if you, at least, know the basics before you actually talk to an accountant.

There are tax consequences that you have to deal with when you buy a real estate in the United States. You would need an Individual Taxpayer Identification Number which you will use with all your tax transactions. Your investment in real estates can be treated as a portfolio investment and will be accounted for as an investment income which can either be fixed or a periodic income. This is typically taxed at 30% on gross revenues. This tax though does not apply though to all foreign investors. Tax rates would vary depending on the tax personality the foreign investor opted for. For instance, a corporation would be taxed differently.

Other things that you should take note of are availability and requirements of tax refunds and state tax laws on real estate properties as they may differ from federal laws, among other things.

By knowing all these things, you may save yourself from a lot of hassles when you finally approach a real estate accountant. You’d be in same wavelength when you finally get down to talking business. It is, however, very important that you secure the services of an accountant. You’d have an easier time dealing with the taxes ramifications. You’d also have assistance ensuring that you comply with all the accounting aspect of your investment. This is especially true if you are purchasing a real property for investment purposes.

Do You Need to Secure the Service of a Real Estate Lawyer?

If you are considering buying a property in the United States, you should secure the services of a real estate attorney – someone who could help you with the legal issues concerning your purchase. It is tempting to forego securing the service of a lawyer to save money, but this could cost you a lot of money in the long run. Make sure that you have an experienced and trustworthy lawyer to help you out. Make sure that you have thoroughly checked out his credentials, profile, history of successful cases handled by him, and other factors that would influence your decision. You could check online and look for a lawyer working within the state where you are considering purchasing a property or just ask us for a recommendation.

Functions of a Real Estate Lawyer

There is no actual distinctive function for a lawyer in a real estate case. However, you would really need the assistance of a lawyer for various tasks. In certain states, a real estate lawyer would review the sales contract for you. He would also check on the title and other documents relating to the property. A lawyer would also review your mortgage contract and make the necessary adjustments or corrections. You could also get him to review with you the legal and tax issues concerning the purchase. A real estate attorney could also make the necessary adjustments relating to various expenses and costs involved in the purchase. He would assess your eligibility for tax refunds and draft the documents and statements relating to this.

Putting it simply, a real estate lawyer will be your watchdog. He would guide you through the whole process of purchasing a real estate in the United States in order to make sure that you will be legally protected. You will have a capable and trustworthy liaison to help you out with the contract. He will also face legal disputes if any arise.

Tips on How to Invest in Real Estate Successfully

Now, if you’ve fully bought into the idea of real estate investing in the United States, you might just want to know how to go about investing in real estate successfully. If you want to be successful in this venture, the first thing that you have to avoid is overanalyzing. Of course, it is a good idea to carefully think through your actions but it is a bad idea to overanalyze your investment to nonexistence. You might lose a great opportunity.

Before you purchase the property though, it might be wise to work with a Realtor that has experience and knowledge of Foreign buyers in the US.  The Realtor can help educate you on area, return on investment, and check property values. If it sits well with you and you can reasonably afford the property, go ahead and make the purchase.

If you are considering the property for a quick flip, make sure that the property is in perfect condition and in good area. This is to ensure that you could double or actually triple your return of investment. If you can inspect the property yourself, do so. If not, a good and trustworthy Realtor and home inspector can help you with this task.

Another important thing to remember when you’re buying real estate is good financing. You should take your time to carefully consider all your financing options. Foreign investors can email in their queries to various lending institutions offering financing to foreign nationals. It is a good idea to ask about their terms and rates, even request a fee worksheet breakdown because these terms tend to change frequently and you want to know what you’re in for. Your real estate agent can help you with reviewing some of these fees.

The bottom line, however, is that it is very important that you do your homework before you actually buy a real property. Investing in real properties in the United States can be profitable especially during these times. In fact, it may be the wisest and most perfect investment you can make right now.

If you need a recommendation to an attorney, reach out.  We are here to help!

Aundrea Beach-Greco

702-326-7866

info@aundreabeach.com

Can a Foreign National Buy Property in America?

Opportunities for real estate investment for foreigners is wide and varied in the United States. It doesn’t matter where you’re from and what currency you’d be using to purchase a property, you have a property waiting for you.

There are generally three kinds of real estate investment available to foreigners. These investments include the commercial estate investment and residential property investment. 

Residential properties are further classified into single family properties, apartments or condominiums and recreational properties. Regardless of what kind of real estate you are interested in, there are all sorts of tax ramifications, financing options and legal requirements that you have to deal with.

Why Should You Invest in the U.S. Real Estate Market?

You’ve probably heard of the increasing number of foreign real estate investments in the United States. This is not surprising. With the troubles that the US real estate investment market faced from the mortgage crisis, there are opportunities in real estate investment were opened to foreign investors.

You'll find real estate bargains all over the United States. There are no shortages of deals in this market. More and more distressed properties are being sold everywhere and foreigners are pouring in millions buying these foreclosed or distressed properties. The United States real estate has become a fairly attractive long-term investment for foreign investors.

In November of 2006, the National Association of Realtors released a report entitled “Foreign Investments in U.S Real Estate: Current Trends and Historical Perspective”. The report showed that there has been a steady increase in foreign real estate investment in the United States. This is especially after the euro and the loonie became stronger in the face of the continuous devaluation of the US dollar. Prime bargains were opened to foreigners. Many foreigners have now looked into the possibility of retiring or settling in the United States.

If you’re a foreigner, you would find a lot of reasons why you should invest in the United States real estate market. Aside from the fact that the floating exchange rate has given you a lot of leverage over the bargaining table, the financial market is a pretty good reason why you should invest in the US real estate.

The financial market in the United States in relation to the real estate market is quite liberal and the restrictions against foreign investors are pretty reasonable. This is ideal for foreign companies that are seeking to invest in the real estate market in the United States in order to avoid tariff restrictions and are considering setting up an office or a company in the United States.

Furthermore, despite the devaluation of the US dollar and the wide foreclosures of a lot of property, the real estate market remains to be stable, though slightly shaky, due to foreign investors’ capital appreciation. Domestic real estate buyers may not necessarily share the same opinion, but the market has remained to be strong for foreign real estate buyers. This may be largely credited to the fact that there is minimal risk for them.

Why are Foreign Real Estate Investments Safe and Profitable?

There are a lot of investments you can make, but the safest you can make right now is investing your money in real properties. This is another good reason aside from the fact that you can make a pretty nifty profit, if you like, particularly now with the widespread property foreclosures and seemingly continuous US dollar devaluation. This is especially true if you are going to use the euro or the loonie when making your investment.

But why is US real estate investment safe for foreigners?

It is undeniable that stock investments are unstable. The recession has not only affected the US economy; the same recession has greatly affected worldwide stock investments. Stock values are currently rising but how long can it continue before a correction will happen.  It is also a fact that even without the current economic situation, stock values fluctuate.

On the other hand, real estate investments are pretty stable if you would compare it to stock investments – or even bond or mutual fund investments. With real estate investment, you’d be putting your money in an investment that would grow in value as years go by.

What are the Benefits of Foreign Real Estate Investment?

US state government supports foreign investments and along this line has formulated various tax breaks to encourage foreign investment on real estate. Many of these tax breaks are not available in many countries. In fact, most countries would frown at foreigners owning real properties within their territory.

Foreign real estate investment in the United States is open to everyone. As long as you can afford to buy the property or at least comply with the mortgage requirements and payments, you can secure for yourself a pretty good property in the United States. Again, with the current economic situation of the United States, this is the perfect chance for you to make an investment.

Another great benefit that you can take advantage of is the availability of mortgage financing. Lenders have opened their doors to foreign investors who are looking into purchasing a property. So, you don’t have to actually deplete your bank account. You can actually secure a mortgage loan and gradually pay it off.

I’m Canadian, What Are My Financing Options?

There is a steady increasing rate of Canadian real estate investors in the United States; and accordingly, the government has made certain that they have attractive financing options available to them.

If you’re Canadian – you’d find a lot of reasons why you should buy a piece of real property in the United States. 

There are various financing options available to you depending on which state you are in. In tourist areas, for instance, you’d get favorable financing terms if you are purchasing a property for recreational purposes, that is, you do not derive any income or benefit from your purchase or ownership. You will be required, however, to sign up a disclosure agreement and give a 30% down payment for your loan. To qualify though for a loan, you may be required to show availability of liquid reserves for a period of three to six months. You may also be required to present a minimum of 3-month bank statement.

If you are purchasing a property for investment, you’d probably meet stricter terms. Requirements may be more stringent. For instance, you could be required to give a down payment of more than 30% and you may be required to show one year worth of liquidity reserves.

Regardless of your reasons, if you feel like you can fulfill the requirements of a financing loan, you can then proceed to actually applying for a mortgage loan. Also, keeping yourself updated with the financing terms may be a wise idea.

Contact me for more information, I am here to help!

Aundrea Beach-Greco 

702-326-7866

www.iLendLasVegas.com

7 Real Estate Hacks First-Time Homebuyers Should Know

1. Low Down Payment Options

While I would never argue against any home buyer having at least 20% to put down on a home for a down payment, the reality is that the vast majority of first-time homebuyers do not have it.  With the rents constantly rising in Las Vegas and cost of living increases, it can be difficult to save a large down payment and the additional cost required to buy a home. 

The good news that few buyers know about is that there are dozens of programs that exist to help first time home buyers with their down payment and some even assist with closing costs.  They include:

• Home is Possible – Down payment assistance for eligible homebuyers in Clark County
• Home At Last - Down payment assistance for eligible homebuyers in rural areas
• USDA – up to 100% financing in USDA Eligible areas 

2. New Construction & Foreclosure Homes Have Hidden Costs

New builds are a great option for some homebuyers but not for everyone and typically not necessarily for first time home buyers.  More often than not, home builders want large deposits based on the timeline to build and close – and then there are those other costs.  Most do not realize that items like flooring, countertops, drawer pulls, decorative wall paint, landscaping (among other items) are usually not included in the purchase of a new construction home.  Some builders will sell them to you; however, it will drive up the cost of the home and the mortgage.  As a result, most buyers end up spending thousands more after closing finishing the home exactly the way they want it.  Additionally, some items like hardwood floors can be less expensive to have installed after closing than at the time of purchase.

Foreclosure homes are also viewed as potentially huge savings but they have hidden costs as well.  Depending on how well the home was maintained prior to and since foreclosure, the home may need thousands in deferred maintenance repairs, which could make the property cost prohibitive.  Unless you are experienced in construction and will have thousands left over after the purchase, it may be wise to avoid bank owned homes.

3. Relocation Homes Can Be Better Deals Than Foreclosures

Properties offered by relocation companies are often more rare to find than foreclosures but a good relo property can be an even better deal than a comparable bank owned home.  One reason is that the home is usually maintained by the prior owner through the time the home was entered into a relocation program.  Another is that the relocation company usually has each home inspected, provides a lengthy report for public inspection, and then has repairs made.  While the report is a great starting point, it is in no way a replacement for your own home inspection.

A real estate agent can help you locate homes in relocation programs.

4. Ask for Closing Help

Keeping your cash in your hands instead of spending it on closing costs is usually smart ways to leverage your money.  Essentially, when a buyer is asking for a Seller to pay for their closing costs, they are asking for an added contribution from the seller or they will be paying a slightly higher price for the home.  The Seller is receiving a higher sales price but a lower net to them so be smart in your negotiations.

Here’s an example of why a Buyer might ask the Seller for closing help:

• The sales price of the property is $200,000 and the closing costs for the Buyer is approximately $6,000.
• The monthly principal and interest payment of a $200,000 mortgage at 30 years at 4.5% is $1013.37.
• Adding $6,000 to the mortgage amount brings the total to $206,000 and only increases the payment by $30.40 per month.

5. Buy Below Your Means and Make Extra Principal Payments

Owning a home doesn’t mean that you need to wait until you can afford a home that is four times the size you currently need and out of your budget.  Considering the current cost of rent in Las Vegas, purchasing the right home can save you hundreds of dollars per month over the equivalent rent.  While some buyers take this to mean they can purchase a much larger home with a payment more in line with what they are paying in rent, consider purchasing a home that is less than your current rent.  With the additional money, you can pay down debt, improve the property, save it for a rainy day or retirement, travel, etc.

Buying below your budget means that you can apply extra money to the principal balance of your mortgage each month to pay it down and save money in costly interest.  You could pay off a 30-year mortgage in 17 1/2 years if you pay extra every year.

6. Can you Assume the Seller’s Mortgage?

One of the hottest trends that I am anticipating in the coming years are assumable mortgages.  The idea with an assumable mortgage is that the new buyer can (if they qualify) assume the mortgage terms of the Seller.  The Buyer would then either pay the difference in cash or take a second mortgage out for the difference.  Assumable mortgages were a popular marketing tool in the 80’s when mortgage interest rates were 15-20% but became unnecessary as rates settled below 10% in the early 90’s.  A few years back, the Fed’s bond buying program enabled millions of homeowners to refinance their mortgages at unheard of sub-4% interest rates and some are assumable.  As mortgage rates are expected to rise over the coming years, a Seller with a ultra-low interest rate that is assumable would be extremely attractive opportunity for any buyer.

7. Get Instant Updates from the MLS

For the last 18-24 months, many first time home buyers in the Las Vegas area have found it frustrating to purchase affordable housing because of a lack of available housing inventory.  The solution: beat the other homebuyers to the punch by seeing the homes as soon as they are listed for sale on the market.  Most very popular websites only update every 24-36 hours with new listings and that is simply too late.  Fortunately, the local multiple listing service has a feature that will notify potential buyers the instant a home is entered into the system that matches their criteria.  Don’t expect there to be pictures right away but, if the home was listed on the market in the last few years, there will be photos of what the home looked like at that time.

If you want a referral to a top agent in the area, just reach out, we work with some of the best.

Aundrea Beach-Greco
(702) 326-7866
NMLS 333739
info@aundreabeach.com
www.iLendLasVegas.com

FHA Approved Condos in Las Vegas ... who knew!

As prices increase in the Las Vegas market, condos are a great option for buyers. There are still many affordable Condo communities and some are even FHA approved.  If you have never purchased and financed a condo, there are some additional steps but nothing that would deter you from considering a condo.  If you need financing, just make sure the lender you select offers financing on condos and has experience with them as it will make your experience much more pleasant. 

Although there are hundreds of condos in the valley, here is a current list of FHA approved condos to choose from. 

https://entp.hud.gov/idapp/html/condo1.cfm

Give us a call if you need more info, we're here to help! 

Buy a home with the Culinary Union (Local 226) Down Payment Assistance Program

The Culinary and Bartenders Housing Partnership provides up to $20,000 in assistance to purchase your first home!

The Culinary and Bartenders Housing Partnership provides the following benefits:
* Post-purchase workshops (in English & Spanish), including foreclosure prevention
* First-time homebuyer down payment assistance loans

Key elements of the program include:

• The down payment assistance loan up to $20,000 has a 0% interest rate.

• You do not have to pay back the loan unless you sell, rent, or refinance the property.

• If you sell, rent, or refinance you pay the loan back at face value with no interest charges.

• You must live in the house you buy (no second homes or vacation homes).

• You must not have owned a home within the past three years.

• You must contribute 3.5% down payment for an FHA mortgage. 

• You must contribute 1% of the purchase price for a conventional mortgage.

• Your combined household income can't be greater than $83,750 for a 1-2 person household. For a household with 3 or more persons, your combined household income can't be greater than $105,350.

• You will be required to complete an orientation class, an 8 hour homebuyer education course and a one-on-one counseling session at no cost to you.

• You must qualify for a mortgage - you may use a lender of your choice. Go to www.iLendLasVegas.com and click apply now

• Funds for loans are limited and will be granted on a first come first serve basis.

If you are a worker covered by the Culinary and Bartenders’ union contract who has at least 2,000 hours of service over a three-year period, then you are eligible for the housing benefit that helps workers obtain the dream of homeownership.

The Culinary and Bartenders Housing Partnership provides the following benefits:

* Homebuyer education and pre-purchase counseling in English and Spanish

Are you curious to find out if you are eligible for the Culinary Union down payment assistance program? Call us and we will go over the details with you and answer any questions you have.

702-718-8000
www.iLendLasVegas.com