Home Buying Finance Details

Most home buyers do not have the cash to buy a home which forces them to obtain a mortgage to finance their purchase. The details related to your financing plans must be included in your offer to purchase as the offer will probably be dependent upon you obtaining finance.

Deposit

You will have to make a down payment to obtain a mortgage. This figure is to be included in your offer as it gives the seller the opportunity to determine the likelihood of you obtaining finance, based on the amount of your deposit.

Interest Rates

Including your financing details in your offer is a way of protecting yourself. You should include the maximum interest rate you are willing to pay in the offer. If the rates become volatile and increase drastically, you will become liable for a much higher mortgage payment. The inclusion of the financing options in the offer will protect you from this type of event.

Incentives and Closing Costs

It is possible for you to ask the seller to carry some or all of the closing costs, or to provide some form of financial incentive. A common request made by buyers is for the seller to provide funds which will allow you to obtain a lower interest rate for a year or two. These incentives are very useful if you are pushing your finance ratio to the limit or if you are short of a bit of cash.

When you request this type of incentive, the seller will probably not be negotiable on the asking price. You have to bear in mind that in these cases, you are requesting that the seller help you buy their house. The bottom line is that if they assist you by relieving the financial pressure during that first period, you are willing to pay more eventually.

Seller Finance

Some buyers request the seller ‘carry back’ an alternate mortgage to help you buy their property. This is an option you have if the seller does not need the funds from the sale of their house to purchase another property. This option could save you some money as you will have the facility to combine your deposit with the seller’s second mortgage, thereby avoiding the payment of mortgage insurance.

If a seller second mortgage is part of the deal you are willing to sign, the terms you are willing to pay on the second mortgage should be included in your offer. You have to advise the lender of your first trust deed about this to enable them to underwrite the loan. There are minimum requirements attached to this. The second mortgage carries a minimum term of five years. The minimum payment you are allowed to make is for the interest only. If you can arrange for longer terms and payments that include principal repayments, this will be acceptable.

You should include all your financing information in your offer to purchase. This will offer you protection if you do not qualify for a mortgage or if the interest rate is too high for your budget.