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Due to stupidity of my lender, it seems like my mortgage loan may not go through. I am less than a week from closing and I am told that my loan application may get rejected due to lender insisting on employer letter that I can work remotely. I can not get this letter. So, I am planning to buy the home outright. The lender already got the appraisal done and telling me now that underwriter is not going to process the loan. We also got the inspection done and it was all good.
Can someone please let me know what do i need to do to buy the home with cash. Is there any risk of buying home with cash. Its less than 5 year old home. If I buy home with cash, can I ask the seller to give me additional credit/reduce the cost by what they would have spent with closing of the loan ? Anything else I need to take care of if I dont go the mortgage route ?
You're not saving the seller any costs from using loan vs cash. You typically save money on your loan costs which is paid on your side.
So if you can use cash to buy for now, and refinance later with a cash out refinance that might be a viable way to go.
Just let the title company know you'll be paying by cash. They probably know by now the loan will not fund, so they would probably ask you soon anyway what you want to do.
See if you can get a refund for the appraisal, since the lender is not funding the loan.
I was in such a situation in 2011/12. A week or 2 before closing we learnt that the condo reserves or something else that I can not remember did not meet the FHA guidelines.
Luckily we had the money so we switched to a cash sale transaction but asked the seller for a discount because we "needed to come up with the money" and they too realized any other buyer would face the same hurdle plus it would mean putting the property back in a stagnant market. At this time it was a buyer's market, there was hardly any viewing of houses and they were stuck on the market for months.
The bank gave us a credit for the appraisal but we never went back to them. In any case since we ended up buying the property the appraisal served its purpose.
There is nothing about your situation that costs the sellers less! The money is exactly the same for them.
The fact that you cannot obtain the financing you contracted for - no matter what the reason - causes stress, it doesn't relieve it. I would not recommend coming at them with this news and asking for a discount like you're doing them a favor.
It would be a very good idea to send them proof that you have the available funds. They may well wonder if you're really going to be able to close.
What you need to do:
Assuming you have an agent, tell them immediately. They will, or should, tell the title company it's now a cash sale. The closing paperwork will have a few differences.
Get instructions for wiring the funds to the title company and make arrangements with your bank to do so. It's a good idea to call the bank tomorrow to talk to them about it to confirm it will be an easy process. If funds are coming from some other kind of account it can take longer to get the money.
The seller wouldn't have spent anything closing the cost of the loan unless you negotiated some closing costs. Not knowing the exact situation, I'd be cautious with asking for a discount for two reasons. First, the sellers will probably freak out a bit when they find out at this late date. And yes, they do need to be informed asap of the change. Don't be surprised if they want to see proof of funds. Second, it's a pretty fast moving market in the Indianapolis area. It's unlikely at this point, but you don't know if they've received a back-up offer for more money.
Thanks everyone for responding. I have not received a formal confirmation from the lender that my loan is declined as of now. So I will wait for that to happen. My realtor is aware of the current situation.
Worst case, if the loan is denied I can walk away as I can continue to stay in my rented apartment. I was hoping that by converting this to a cash transaction I would be able to help the seller. There was seller credit associated with the closing of the loan that is why I believe they should give me some discount to offset some of my cost for arranging the funds at such a short notice.
Gee, I remember the good old days when lenders weren't looking up your *ss with a searchlight. I got a mortgage from a small midwestern S&L that held it's own paper back in 2008 just before everything crashed, and they ran me ragged documenting deposits and all sorts of crazy stuff that occurred years before. Oy.
Well, the crash happened because many were doing loans without documenting *anything*.... somewhere in between, I hope, is a good balance.
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