LenderSelect Mortgage Group Lender Solutions to Save Your Sale

Understanding Closing Costs Seller Contribution Limits VA – unlimited FHA – 6% Conventional – based on down payment 3% if down payment is less that 10% 6% if down payment is between 10%-24.99% 9% if down payment is 25% or more 2% on all investment properties VA – 4% max on prepaids & debts

Closing Cost Examples Why does the % increase, if the sales price decreases? Because there are fixed costs in all 3 scenarios (e.g. appraisal, flood cert, title search, credit report, recording fees, settlement fees, etc.)

Unique Costs Unique, additional costs to be prepared for: Capital contribution condo fee Flood insurance Elevation certificate Well & septic inspections If a new flood insurance policy must be obtained, an elevation certificate is required and may cost several hundred dollars (apx. $300) VA loans always require termite inspections. All other loan types do not require this, unless noted on the contract. VA and Rural loans always require well inspections, if applicable. All other loan types do not require this, unless noted on the contract. Septic inspections, if applicable, are not required for any loan type, unless noted on the contract.

Optional Costs Services not required Surveys Home Warranties Is the subject property a condo? Does the subject property already have a fence? Is it new construction? Home Warranties

Troubleshooting Problem - Both the Buyer and Seller closing cost contributions are not enough Solution – Negotiate an increase of the sales price Buyer must still qualify Property must appraise Examples of situations: Seller may not be willing to give more contributions Seller may not be in a financial position to give more contributions The sales price/loan amount is lower, and the amount of closing costs exceeds the maximum limit of the program

Troubleshooting Problem - Both the Buyer and Seller/Builder closing cost contributions are not enough Solution – Lender credit; the buyer can take a higher rate and receive a lender credit towards the remaining closing costs Buyer must still qualify Loan must pass Safe Harbor test Examples of situations: Seller may not be willing to give more contributions Seller may not be in a financial position to give more contributions The sales price/loan amount is lower, and the amount of closing costs exceeds the maximum limit of the program Be sure to mention ABMG’s low origination cost of $699 for all purchase transactions What is Safe Harbor? All ABMG loans must pass both the Qualified Mortgage (QM) and Ability to Repay (ATR)/Safe Harbor (SH) tests QM – no excess upfront points and fees (3% of the total loan amount) ATR/SH - APR with a difference < or = 1.50% of the APOR (Average Prime Offer Rate) index

Troubleshooting Property Concerns Problem - Minor repairs that neither party want to pay for, prior to closing Solution – Escrow holdback Appraisal must reflect As-Is, not Subject To Dependent on the type and cost of the repair An appraisal that is “Subject To” repairs CANNOT close with an escrow holdback. The repairs must be completed and a final inspection must be done, prior to closing.

Troubleshooting Property Concerns Problem - Property is older and inefficient, but the seller will not pay for updates Solution – Energy Efficient Mortgages (EEMs) Buyer may finance qualifying energy improvements Buyer must still qualify Does not include certain appliances (i.e. refrigerators or dishwashers) Only available on government loans (primary residences) FHA – lesser of 5% of appraised value, 115% of media area price, or 150% of Freddie Mac limits VA – up to $6,000

Condo Insurance – Master Policy Provides 2 types of coverage for common areas General Liability Property (building replacement) Condo projects with more than 21 units must also have: Fidelity (Crime) Coverage – protects against theft of condo funds and/or financial mismanagement Must cover at least 3 months condo dues for each unit in the project Two-Four Unit Condo Projects (very common in Hampton Roads) Must have $1M general liability coverage in a master policy (all units references, and cannot be separate policies) Condo docs, bylaws, and condo questionnaire (if there is a condo association) are required HO3 condo insurance policy is required

Condo Insurance – HO6 Policy “Studs-In” Covers the interior of the owner’s unit Covers personal property within the unit Usually has a small deductible and is fairly inexpensive Must provide coverage for at least 20% of the appraised value Required by lenders on all condos

Condo Approvals - Conventional Since LSMG is Fannie Mae and Freddie Mac Approved, we can warrant a condo for up to 6 months! Limited review process - waives the need for a condo questionnaire and/or condo approval, due to favorable aspects of the loan Primary homes – 10% down payment Second homes – 25% down payment Investment properties – not available 2-4 unit condos will be ineligible for limited review Automatic limited review* of detached condos Pre-sale requirement has been decreased from 70% to 50% (attached, new construction) Increase from 30 days to 60 days on delinquent condo dues (15% of unit owners) Single entities may now own up to 2 units on projects between 5 -20 units; 21+ units are capped at 10% single entity ownership Increase from 20% to 25% in allowable commercial space Waiver of condo documents, if limited review* guidelines are met

Condo Approvals - FHA FHA condo approvals can be found online https://entp.hud.gov/idapp/html/condlook.cfm Condo questionnaires are still required, regardless of approval status As a courtesy to our clients and referral partners, LSMG will submit condo packages to FHA for review and approval Condo questionnaires are still required on FHA loans, regardless if the development is currently approved

Condo Approvals - VA VA condo approvals can be found online: https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch Condo questionnaires are not required if the development is VA approved VA condo approvals do not expire

How Can LSMG Help You Save Your Sale?