1. LenderSelect Mortgage Group Lender Solutions to Save Your Sale

2. 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

3. 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.)

4. 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.

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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

11. 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

12. 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 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

13. Condo Approvals - FHA FHA condo approvals can be found online
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

14. Condo Approvals - VA VA condo approvals can be found online:
Condo questionnaires are not required if the development is VA approved
VA condo approvals do not expire

15. How Can LSMG Help You Save Your Sale?