Financing Contingency Question (loan, fixed rate, interest, rate)

[Allie S]

My husband's company is transferring him to a new city. We know which house we want to buy, and are ready to put in an offer. Our contingencies would include a obtaining financing.

Here's the thing. The transfer is 99.999999% guaranteed, but we need to make the offer on the house before the transfer is 100% guaranteed (or we'll be forced to live in an expensive hotel with kids and dogs, as sublets aren't common in the area). It's our dream home, a great price, and there are several offers. However, we don't need to sell a home (husband's company will pay market value), which will definitely be in our favor, but we need to act quickly.

My question is, to protect ourselves in case the transfer falls through, could we put the financing contingency as obtaining a fixed rate mortage for say, 5.9%, when we know we know the lowest interest rate we could get would be 6.25%? My understanding is we could still buy the house with the 6.25% rate (as long as the transfer goes through), but if we needed to back out, the financing could be our safety net.

Our agent is a family friend, and I don't want to give her too many private details, so I thought I would post on here.

Does anyone know if I am correct in thinking this would protect us?

Thanks for any help you can provide!

[BobKovacs]

As a seller, I'd reject an offer that had a financing contingency requiring a mortgage at an unrealistic rate. If the going rate is 6.25%, and rates are trending upwards, why would I agree to make our sale contingent on you receiving financing at sub 6%???

I think you need a different plan.....

Bob

[llzpa]

My other thought would be that if there were several offers, why would they take a contingent offer at all?

[Racelady88]

I would laugh at, and instantly reject, any offer that included a rate in the financing clause.

[WendyK]

WHen will your husband be 100% sure about the transfer? I'd make the offer contingent upon his verification of the new job by a certain date as well as subject to obtaining lender financing (no specified interest rate). That way you can still secure the home you want but have an out in case something happens with his job transfer.

[Southside Shrek]

Fluid contigencies are generally not acceptable. You can almost count on an unreal contingency being rejected by Seller and being hit with a counter.

[Tish Thompson]

Originally Posted by Allie S

My husband's company is transferring him to a new city. We know which house we want to buy, and are ready to put in an offer. Our contingencies would include a obtaining financing.

Here's the thing. The transfer is 99.999999% guaranteed, but we need to make the offer on the house before the transfer is 100% guaranteed (or we'll be forced to live in an expensive hotel with kids and dogs, as sublets aren't common in the area). It's our dream home, a great price, and there are several offers. However, we don't need to sell a home (husband's company will pay market value), which will definitely be in our favor, but we need to act quickly.

My question is, to protect ourselves in case the transfer falls through, could we put the financing contingency as obtaining a fixed rate mortage for say, 5.9%, when we know we know the lowest interest rate we could get would be 6.25%? My understanding is we could still buy the house with the 6.25% rate (as long as the transfer goes through), but if we needed to back out, the financing could be our safety net.

Our agent is a family friend, and I don't want to give her too many private details, so I thought I would post on here.

Does anyone know if I am correct in thinking this would protect us?

Thanks for any help you can provide!

I think the bigger problem is that you don't trust your agent enough to discuss this with him/her. In order for your agent to adequately protect you, he/she needs to know the scoop.

[Tish Thompson]

Originally Posted by Evey

I would laugh at, and instantly reject, any offer that included a rate in the financing clause.

Why? There are programs that allow a borrower to buy down their interest rate...First Horizon just rolled out a new product that covers this if certain criteria are met.

Instead of advising my client to reject the offer, I'd do some homework to get the low down on how the prospective buyer came up with the numbers, then counter.

[mbmouse]

I am not a Realtor but a mortgage broker, just so you know where my suggestion is coming from. How much of a earnest money deposit are you putting down? If it is worth the gamble and you are that sure the transfer would come through, take the gamble with the earnest money. Basically if you give a no contingency offer, except a basic "on financing" clause and say a $500 earnest deposit, you don't get the transfer, you lose the $500.00 and back out of the contract. If the transfer does happen, you get your dream home.
Again, just my 2 cents

[olecapt]

Well first off I would try to solve the problem the other way. Ask the employer to cover any costs encountered if the transfer does not go through...as a rule any employer that covers buying the house will agree to such a term if you ask the right person. I used to move dozen of people across the US...we would always keep the guy whole if it blew up.

Next I would talk to the banker and see if I could set up an arrangement where they turn the loan down if he did not get the new job. They can be very accomodating on such things if they chose to be.

I doubt that a funny interest rate contingecy would work. Better to be honest and make it contingent on the transfer occuring. If the market is like here you can probably get the contingency if you have reasonable timing. ie you can't call it off three days before closing.

To the agent who does not like interest rate contingencies...you wiould be out of business here. Virtually every contract has one. Generally we set them a little above the going rate...but there is one in virtually every contract.