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Old 06-09-2018, 05:50 AM
 
1,765 posts, read 866,602 times
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As someone who has sold many homes I can tell you that I don't deal with any zero money down loans any longer. I have no confusion about earnest money vs downpayment as one poster said. But I don't want to sell to anyone who doesn't have money to put down on a house. Likewise it is very rare that I will run into an appraisal issue. These are not the reasons that I have an admitted bias against these loans.

Zero money down loans are normally federal subsidized loans (VA, USDA). They can come from other sources (and did during the financial crisis) but most of the time these days they are from the feds. There is an huge chance that closing will be delayed, that some kind of red tape the buyer is being asked to deal with will hold up the loan. There is an equally large chance that the buyer will ask for lots of repairs and closing costs as they don't have the extra money to put into the house. As a seller, if I have another option, you better believe I am going with it. Zero money down spells headaches for me. In the past few years we have seen more than one federal shut down and that adds another level of uncertainty and delay to these loans if the buyer is caught trying to get financing during one of the shutdown periods. Nightmare for everyone.

I have had realtors get very frustrated with my refusal to deal with zero money down buyers and try to convince me that they are viable, but I disagree. In the dozen or so homes I have sold in the last decade I have had two experiences with zero money down and one totally fell through because the buyer could not pay a small fraction of the closing costs, and we walked away from the other due to MONTHS of delays to close as the feds needed one thing or another. As a seller, its a headache to deal with these loans. In the home before last that we sold, I had multiple bids and my agent told one of the zero money down folks that they were not in the running due to their loan type. Their best and final came back with conventional financing and 20% down. They got the house. In competitive situations I don't think zero money down is helping a buyer at all even if they can afford closing, etc.

On a personal level, I would never buy a house putting nothing down for a down payment as I think mortgage insurance is a huge scam. But to each their own. When I buy a house, I try to ensure that I have enough put aside after the downpayment to do any immediate repairs and that is how I calculate the affordability of the home. If I can't do a downpayment/closing and repairs with my chunk of change (or pay in cash and have enough left over to do repairs) I don't buy that house because i can't afford it. But that is me. A bank will give you a LOT more money than you can actually afford to repay. It makes no difference to me how much a lender will overextend a buyer so that he/she will get into my property. All I care about is that my transaction goes through smoothly with the least cost to me as a seller.

Also, I lived in co-ops in NYC which required all buyers to have a very healthy debt to income ratio and at least a 25% downpayment. So even though the bank might say you can buy this place without any downpayment, the board had their own criteria. At the time, I thought it was silly. Now I definitely subscribe to that mindset. It never hurts a seller to have an extra layer of caution about some of the loan products out there and choose buyers wisely.

Last edited by emotiioo; 06-09-2018 at 06:21 AM..
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Old 06-09-2018, 06:14 AM
 
Location: Cary, NC
31,592 posts, read 55,307,520 times
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Buyers will close on two VA loan-funded purchases next week.
Smooth as can be.

Another one in the hopper for later. It will be fine.

Focusing on any loan program, over the nuts and bolts of the property, the transaction, and the borrower's performance are unfortunate behaviors.
Yeah, if the property is crap, and the seller doesn't care and wants to blame the world, and the seller and their agent don't know how to work a transaction, there can be issues.

But, I have just as many or more transaction issues when buyers are making 5%, 10%, 20% or more down payments as I do with FHA and VA borrowers.
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Old 06-09-2018, 06:23 AM
 
7,843 posts, read 11,140,440 times
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Quote:
Originally Posted by Diana Holbrook View Post
Certainly if there is more than one offer to choose from, one might choose either someone with more money down or a simpler loan type if you are concerned about the house passing more detailed appraisals.

But that doesn't mean people with 0 down necessarily have a weaker offer. I do know many who have good solid resources, and choose 0 down VA loans because VA interest rates are low and they're conserving or other otherwise investing their cash.

If you're uncertain, a call from your realtor to the lender can sometimes help confirm whether buyer is well qualified.
Exactly. I'm in this boat. I could easily buy either a more expensive home 20 or more down, conventional loan or buy the price range I'm looking in with cash. But I've never used my VA loan, I'm retired and want to hang on to my cash so
that's what I'm going to try to do. If I can find something that works for me in my lower price range it will allow me to buy a lake lot with cash to camp on since I refuse to pay lake house prices for some crap house in an area where you only use the lake 4 months of the year.

The VA doesn't have PMI for no money down but they do have some sort of fee based on percentage. Not a big deal.

I go back and forth on putting money down to get the payments where I like and just having a monthly withdrawal from brokerage account. Not sure which way to hop on that yet.
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Old 06-09-2018, 06:24 AM
 
1,765 posts, read 866,602 times
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Quote:
Originally Posted by MikeJaquish View Post
Buyers will close on two VA loan-funded purchases next week.
Smooth as can be.

Another one in the hopper for later. It will be fine.

Focusing on any loan program, over the nuts and bolts of the property, the transaction, and the borrower's performance are unfortunate behaviors.
Yeah, if the property is crap, and the seller doesn't care and wants to blame the world, and the seller and their agent don't know how to work a transaction, there can be issues.

But, I have just as many or more transaction issues when buyers are making 5%, 10%, 20% or more down payments as I do with FHA and VA borrowers.
That's great that its your experience that zero money down loans close smoothly. It has not been mine. We have to operate on what works for each of us. I won't deal with a zero money down loan as a seller.

Its always amazing to me on this forum how many pros want to blame a buyer or seller for not sharing their perspective. Why not just work with people where they are at instead of trying to talk them out of their own experiences? Obviously you have sellers who are okay with VA loans/zero money down loans. Great. But its a big world with a lot of different kinds of people in it. If someone says "I don't want to deal with X" why try and tell them "X is great-- smooth sailing"? Why not just say "okay, we won't consider that option?"
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Old 06-09-2018, 06:32 AM
 
Location: Cary, NC
31,592 posts, read 55,307,520 times
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Quote:
Originally Posted by emotiioo View Post
That's great that its your experience that zero money down loans close smoothly. It has not been mine. We have to operate on what works for each of us. I won't deal with a zero money down loan as a seller.

Its always amazing to me on this forum how many pros want to blame a buyer or seller for not sharing their perspective. Why not just work with people where they are at instead of trying to talk them out of their own experiences? Obviously you have sellers who are okay with VA loans/zero money down loans. Great. But its a big world with a lot of different kinds of people in it. If someone says "I don't want to deal with X" why try and tell them "X is great-- smooth sailing"? Why not just say "okay, we won't consider that option?"

My response did not quote you. It was a post for the benefit of readers who may benefit from reading a balanced view, or who may be swayed by small-minded anecdotal superstition.
When you state that you willfully discriminate against a set of qualified buyers and against service veterans, it seems reasonable to propose to the open forum a viewpoint that is not overblown.
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Old 06-09-2018, 06:42 AM
 
1,765 posts, read 866,602 times
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Quote:
Originally Posted by MikeJaquish View Post
My response did not quote you. It was a post for the benefit of readers who may benefit from reading a balanced view, or who may be swayed by small-minded anecdotal superstition.
When you state that you willfully discriminate against a set of qualified buyers and against service veterans, it seems reasonable to propose to the open forum a viewpoint that is not overblown.
Oh. My.


There is nothing discriminatory about not selling your home to someone who might have a difficult time closing when you have other options. Might I point out that there were others on this thread who agreed with the OP's point of view and that sellers have every right to work with a buyer with whom they can agree on terms of sale? Geez, Mike, it might be time to get some retraining in customer service if you are calling out any seller who doesn't agree with you as "superstitious" and "discriminatory." WOW.
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Old 06-09-2018, 07:01 AM
 
Location: Rochester, WA
3,827 posts, read 2,047,976 times
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In my experience what matters more than the loan type are the realtors and lenders involved. Not just the institution, the person involved. Good lenders can make the loan go smoothly no matter what kind of loan it is.... and bad ones can mess up and delay even the simplest of transactions. Both with who they are willing give a pre-approval too, and how they run their business.

The ONLY time I've seen VA or FHA loans go bad it was because of the lender being reactive and unorganized. I might reject an offer now because it has that lender attached to it, not because of the loan type.
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Old 06-09-2018, 07:09 AM
 
1,765 posts, read 866,602 times
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Quote:
Originally Posted by Diana Holbrook View Post
In my experience what matters more than the loan type are the realtors and lenders involved. Not just the institution, the person involved. Good lenders can make the loan go smoothly no matter what kind of loan it is.... and bad ones can mess up and delay even the simplest of transactions. Both with who they are willing give a pre-approval too, and how they run their business.

The ONLY time I've seen VA or FHA loans go bad it was because of the lender being reactive and unorganized. I might reject an offer now because it has that lender attached to it, not because of the loan type.
If the federal government shuts down in the middle of underwriting, no matter how great the lender is, that is a huge issue. And an issue that is specific to a federally subsidized loan. Its just another level of risk. We had a family member who was selling a house during the 2013 shutdown to a buyer who was using a USDA loan and heard first hand what an absolute nightmare it was for everyone. We had two (short) shutdowns in 2018 and there is every possibility that there will be more.

But in general I do agree that a great lender makes a difference in the ease of the transaction.
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Old 06-09-2018, 07:14 AM
 
881 posts, read 461,070 times
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If the deal closes what does the financial situation of the buyer matter to the seller? I would think it does not matter at all.

While I agree with OP's husband that a 0% down payment is a huge moral hazard, not just for the banks but for the buyer, the community, and the nation as a whole, it should not matter to you as a seller as far as the transaction goes. You could still reject the offer on moral grounds, but you will need to find another buyer.
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Old 06-09-2018, 07:30 AM
 
1,765 posts, read 866,602 times
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Quote:
Originally Posted by InchingWest View Post
If the deal closes what does the financial situation of the buyer matter to the seller? I would think it does not matter at all.

While I agree with OP's husband that a 0% down payment is a huge moral hazard, not just for the banks but for the buyer, the community, and the nation as a whole, it should not matter to you as a seller as far as the transaction goes. You could still reject the offer on moral grounds, but you will need to find another buyer.
I agree with the OP's husband too. I would rather not be involved in a transaction like this. I gave it a shot and was burned both times.

The bigger issue is a moral one, I agree. Why people think that buying a home with NOTHING down won't contribute to undermining our national economy is a head scratcher for me. We saw exactly what all the loosey goosey lending practices brought us in 2008 and how many people lost their shirts and their homes by buying more than they could afford. It affected not only the unwise and over extended but everyone who wanted to buy and sell a home during that period. I know people who are just now, a decade later, getting their property values back.

I think its irresponsible to try and buy a house you can't afford. Believe me, I would love to live in a beachside mansion, and with some creative financing I honestly might be able to get into something close to that. But its not truly affordable for me, no matter what the lender might say.

http://money.cnn.com/2017/06/16/real...ard/index.html

Last edited by emotiioo; 06-09-2018 at 07:41 AM..
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