Buying and Selling: November 2008 Archives
This really gets me angry. I think it's past time to declare war on this subject. I hope folks will send copies of this to their legislator and congresscritter and demand immediate action in no uncertain terms. Actually, existing law should be more than adequate to cover this - so send your governor and attorney general such missives, as well.
First, let me share a piece of information that the general public may not be aware of. When there is a prospective short sale of real estate, the listing agent is allowed to continue marketing that property even though there may be an accepted offer. In plain english, it still shows "Active" or "Available" on MLS, among many other things.
I understand the reasons for this. Approximately one in five turns into a completed sale. Therefore, four out of five do not. The people who are selling their property "short" are usually in fairly dire straits, and the wasted time can often mean the difference between selling (albeit at a loss) and foreclosure.
I simply disagree with it, mostly due to abuses by listing agents.
There is an absolute requirement in my local MLS. The property must have the phrase "Offer accepted pending lender approval of short sale" as the very first words in the "Remarks" section, which people viewing MLS and the various other listing services sourced in MLS can see for themselves, without the benefit of an agent, or if they're perusing some kind of gateway that an agent has set up for them. The "Remarks" section is public information, available to the general public, and putting the magic phrase right in the beginning of "Remarks" might cause it to be noticed - if the agents actually put it there.
Instead of this, you'll find this phrase sprinkled everywhere except where it's supposed to be. "Mandatory Remarks" or "Confidential Remarks" (Both of which show to other agents, but not to prospective buyers), buried deep in the "Remarks" where it won't likely be noticed, or in the "Supplemental Information" section.
I just today had another reminder of this. Some clients from out of town came in and wanted to view properties. I called the agent on this one particular property listed for below nearby comparables, who swore there were no offers. So I took my clients to that property. They liked it. After due consideration and several days time during which we found out their first choice wasn't going to work, they decided to make an offer. Great! I start up WinForms, e-mail them the offer paperwork, start writing a pre-qualification letter, and call the agent, who swears there are still no offers. This is 4pm on a Friday. I get the email with the signed offer back, and first thing Monday morning present the offer. Except that over the weekend, there have miraculously appeared no fewer than four offers for tens of thousands of dollars more, and that they had an accepted offer that my client's offer was not competitive with, despite my client having offered full asking price - I know about short sales. Considering the fact that I had tried to call the agent over the weekend and gotten no response at all to multiple messages, I find that impossible to believe. They weren't working over the weekend. Their office wasn't working over the weekend. Exactly when did all of these offers come in? Either they were lying to me Friday, or they were lying to me Monday. Since my client isn't interested in the property at the higher price, I hope for their sake that they were lying to me Friday, but this is still a violation of the duty of fair and honest dealing. I found the magical phrase today, though - buried deep in the supplemental information, where it doesn't really mean anything, and certainly won't be any obstacle to innocent buyers who don't know any better than to use the listing agent calling them about the property.
Furthermore, there is an epidemic of mis-representing the asking price on short sales. "Low-balling," to use the common parlance, only this is coming from the listing agent. More than half of the short sales I check out are priced so low that there is no way on this planet that the lender is going to accept even a full asking price offer. Our offer was marginal - the comps showed something not too terribly much higher, so the offer was reasonable, especially considering the fact that the "No tax for income from debt forgiveness" dies in about six weeks and is not likely to be renewed.
But combine an already accepted offer with continued marketing and a low asking price, and you have nothing other than the classic trick of "bait and switch". An asking price is a representation in writing of an offer that the seller would be glad to accept. But if the seller would not be glad to accept that offer, it is false advertising plain and simple. An offer of that asking price would not have even been considered, seeing as they have an offer for tens of thousands of dollars more that they have accepted. There is no way on Planet Earth that a full price offer for $x is going to be accepted when there is a fully negotiated purchase contract for $x+40,000, or even $x+1000. You know it, I know it, even the communist die-hards still left here and there, mostly in western universities, know it. Even if the lender might have considered such an offer before the higher offer was received, they are not going to do so now.
Let us consider: Why, then, is the property marketed at a price lower than any conceivable offer which might be accepted?
Plain and simple, it is so that the listing agent can meet prospective buyers for other property. They are using this property, marked to a price well below the market which it cannot really be obtained for, as a lure to draw in prospective buyers. These agents are putting out an advertisement that essentially says, "I have a property for sale for tens of thousands of dollars less than it's really worth!" They don't have that property for sale at that price; they don't really have it for sale at any price. Until and unless that buyer with the current contract bails out, there is a cloud on that title and the seller is not free to sell it to anyone, no matter the asking price.
(I know it's "subject to lender approval of short sale," but if the lender were to refuse a given offer, than accept one for a lower price, that would certainly be fodder for all kinds of lawsuits starting at Equal Housing Opportunity and going from there - not to mention that you are kidding yourself if you really think there is a possibility of a lower offer being accepted by the lender right after a higher one is rejected. Several months on, maybe, if nothing else is submitted in the meantime. Right then? No)
So the listing agents are using a property they don't really have at a price they definitely don't have it to lure prospective buyers into contacting them, hoping to sell them something else. Have I missed anything? Oh, right, they are still hoping to persuade some folks it may be worth enough over the asking price to be worth making such an offer. But if an offer comes in for "merely" the asking price, they are going to tell the party making it that such is not good enough. I therefore submit that the property is not for sale for that asking price, which makes a representation that it is for sale thusly FRAUD.
This is illegal in California, and in most other states. Substitute "car" for "property" and you have a couple of the elements of the slimiest used car salesperson from fifty years ago, before we ever heard of consumer protections in law. Furthermore, it's entirely untruthful, and it violates several core concepts of the Realtor's Code of Ethics and Standards of Practice. The National Association of Realtors is lying to itself, its members, and the public if they think their claim of improving the industry does not directly conflict with this, and indeed, is not completely contradicted by this policy. The NAR is not after the benefit of the public - they are after the benefit of the major national brokerage chains which control it.
What would I like done about it? Ideally, I'd like all properties moved to "Pending" as soon as there is a fully negotiated contract of sale. Not optimal for the seller, but it is the only way of dealing fairly and honestly with the general public. There is a contract of sale in effect, exactly the same as any other pending property, and if nothing happens to prevent it, that property will be sold on those terms, exactly the same as any other property. Such a thing would only be done over the dead bodies of the major brokerage chains, but it's not like that's a public interest argument against such a course. That this particular contract has one additional contingency is no excuse to treat it any different than any other.
The absolute minimum compromise I am willing to settle for is that the asking price listed in all advertisements reflect the highest current offer as a minimum. If there's an accepted offer for $400,000, it might be acceptable to market it for $450,000 - you should not be able to market the it for $350,000. It isn't for sale for $350,000, and there isn't any rational disinterested judge who is going to believe that it is. You would probably be able to get the current contracted buyer to relinquish their interest for an immediate profit, and it wouldn't break the lender's heart either, to be losing less money than they thought. But there is no way on Planet Earth that the property would actually be available for purchase for $350,000, and to represent that it is is nothing short of FRAUD. Marketing such a property in thus a fraudulent manner is a legal and ethical violation of all the laws and principles of business that have evolved over the last hundred years since there have been Realtors. If the NAR wants to retain the confidence of the public, it is time that they fixed this. If the NAR does not want to act, I intend to do my best to ensure that Congress and the legislatures of all fifty states will.
Furthermore, if the lender has rejected an offer at a certain level, that should also be a "floor" for asking price. If the lender has rejected an offer for $400,000, you can be pretty darned certain they're not going to accept one for $350,000, and marketing the property thus is no less fraudulent than in the previous example. You still have to submit any offers that do come in, but you're not fraudulently marketing the property for far less than there is any chance of someone purchasing it for. If the owner in a non-short sale situation tells you they won't accept $400,000, would you think that marketing the property at $350,000 was ethical? It certainly wouldn't be legal. That lender has to sign off on releasing the trust deed. You can't deliver clear title to a buyer at $350,000, and you know it. In any other situation, with any other commodity, this would be false advertising, subject to severe penalties. Why, then, do we countenance marketing such properties thus?
What can we do as individuals until that happens? I have been putting a requirement to cease marketing the property in all short sale offers I've been making. Move it to "Pending", stop advertising it as available for sale in other venues - or my client's offer goes away, and said clients have a right to sue for damages. This is for my client's protection. Suppose the seller gets another offer for $5000 more than my client's accepted offer - which offer do you think the lender is going to accept? Not to mention that in the meantime, my clients are going to be spending money on for an inspection and appraisal and possibly other things as well. Might the seller, in such circumstances, not be tempted to find an excuse to bail out of that contract, possibly leading to lawsuits and court appearances and judgments (Oh, my!) and in any case, endangering my client's right to purchase that property, which is what they want and where their interest is. If you're putting an offer in on real estate as a purchaser where a short sale may be involved, may I suggest that you do the same?
If you are a listing agent who doesn't like this, may I suggest you get real about investigating which offers are backed by a strong ability to perform, and which are not, instead of some meaningless prequalification or even pre-approval letter that says these buyers might qualify for enough to fund the loan. There are four things I want to know: debt to income ratio, loan to value ratio, credit score, and verification of cash to close. Time in line of work might also be nice to know, but is harder to verify. You can't require anyone to get a letter from your favorite lender, an illegal practice I'm seeing more and more of ("Steering" is illegal under RESPA, and not just kind of).
May I suggest you also get serious about investigating what kinds of offers the lender actually might accept? I know they don't want to tell you what they would accept, but find out how this lender evaluates short sales for acceptance. I mean the actual decision-making, not treating it as a "black box" where you input the standard short sale package and a commission check just might pop out. You're trying to get this property sold, and once you put a low asking price on it, you're probably not getting offers at a higher level than that. In any other situation, this would be violating client interests and fiduciary duty by repricing a property thus. The fact that there is a short sale involved in no way changes this no matter how much you allow yourself to be distracted by it. When your clients start getting tax bills for debt forgiveness here when the current forgiveness expires in a few weeks, you're going to be in a world of hurt legally, as well. Here you are telling the client "Short sell by $200,000? No problem!" and then they get a tax bill for over $50,000 from the IRS, at least part of which would have been avoidable by putting the correct asking price on the property. How do you think a lawyer is going to interpret that? Don't expect any sympathy from the people who have been doing it right, either.
Short sale bait and switch is just as much a violation of good business practice and the law as telling people, "That airport is going to close!" when it isn't, or "that factory isn't an environmental hazard" when it is. Let's all put a stop to this fraudulent practice now.
Caveat Emptor
A Purchase offer is not money in your pocket. As a matter of fact, accepting the wrong purchase offer can cost you tens of thousands of dollars if the buyers can't consummate.
I recently dealt with clients making an offer on a property where the comparable sales run in the $350,000 to $370,000 range. The ask is $380,000, which isn't outrageous in and of itself, but Seller Paid Closing Costs are so endemic that they are essentially priced into the market, at least up to a price of half a million dollars or so where first time buyers peter out. My clients initially offered a price a bit above the lower end of the comparables, and paying their own closing costs. The owners rejected that but my clients really liked the property, so we sweetened it to what was essentially a full price offer, without any appraisal contingency, and the mechanics of my clients' offer (larger than necessary down payment) were such that there wouldn't be any obstacle to getting the loan and closing the transaction unless the appraisal had come in under $330,000.
But when I called the agent on the phone to make certain they got it, she was quite snippy, implying that they have offers for tens of thousands more. Well, I don't know that she had the greatest negotiation technique in the world, because it completely turned me and my clients off of the property.
What I do know is that people offering way over asking price are not, in my experience, coming in with large down payments. In fact, when I dealt with them in the past, they were mostly first time buyers who were asking for seller paid closing costs, and even sometimes Down Payment Assistance back when it was still available. Basically, the deal is "We'll give you a really great price if you pay for all the ancillary costs we don't have the cash for." And these transactions result in everybody being happy and even noticeably higher commissions for the agents, as commission is paid on the full sales price.
So far, so good. But what if the appraisal is lower than the purchase price? The comparables in this instance are all between $350,000 and $370,000, as I said. Even moving up in the square footage department and adding another bedroom won't boost that much, as the property is already above average for the neighborhood - anything much more would make for a misplaced improvement.
The upshot of all of this is that the appraised value is not likely to be sufficiently high to support the loan value, unless the competing buyer has a much larger than required down payment, which they can then use the excess of to pay the amount that the sales price is over the appraisal on a dollar for dollar basis. As I've said, this isn't likely to be the case where someone is offering significantly above the asking price. People who have somehow acquired the money for more of a down payment understand that this is real money, far more than people with a minimal down payment planning on simply having higher payments.
So unless the appraiser commits fraud, the value is going to come in between $350,000 and $370,000. Let's be generous and say $370,000. Lender's evaluate value on an "LCM" or "lesser of cost or market" basis. Since the appraisal will be beneath the purchase price (if representations are correct), the lender will treat the value as being the appraised value, which we have posited to be $370,000. Let's say the purchase price is $400,000. For a 100% Loan to Value Ratio loan, which are not available right now, the lender will only lend $370,000. For a VA loan, which will go to 103% for veterans of the armed services, the limit would be $381,100, including loan costs, and everything else including the VA funding fee - the real limit is $375,550 for the buyer's purposes. For FHA loans, the limit would be $363,525, and that includes the 1.75 points the FHA charges - the real limit is $357,050. For conventional conforming, the effective loan limit is either 90% ($333,000) or maybe 95% ($351,500).
So, assuming a $400,000 purchase price, to make a VA loan fly, the purchaser has to have a down payment of at least $24,500, and that's assuming they're not paying any loan charges, at least not themselves. For the FHA, they would need $43,000. For conventional, maybe they could get by with $49,000, but it's more likely they would need $67,000. All of these figures are exclusive of any transaction costs the buyer is paying, of course.
If that buyer doesn't have that cash, that transaction is not going to happen. You might as well reject it to begin with, because if you accept it, all that is going to happen is that you're going to waste six weeks or more waiting for Godot. It is my usual experience that buyers with down payments of the size indicated understand that dollars are dollars, no matter what form they are in, and are unlikely to offer prices much over asking. There are exceptions, but not many. The reason people end up paying more than asking price is because they need something special from the seller, and therefore the seller who is willing and able to give it to them can extort a higher price for that property in return, and the most common reason why buyers need these sort of concessions is because they haven't got the cash necessary for the down payment plus closing costs. Therefore, in order to induce the seller to give them the extra they need in some wise, they offer a higher official purchase price that nets the seller what they want after the givebacks. Unfortunately, if that higher purchase price is not supported by the appraisal, the buyer then has to come up with more cash - and we just posited that they don't have it. Prognosis for the transaction: not good. So perhaps it might be a good idea to require a buyer to come up with some evidence that they do in fact have the necessary cash to make the transaction happen. When I write a buyer qualification letter, that is one of the essential parts it must contain: Evidence of cash to close. When I have a listing, that's one of the things I want to see evidence for before I advise accepting an offer: Evidence of cash to close.
Too many agents became used to the Era of Make Believe Loans, and don't understand yet the implications of it being over. Whether you're a buyer or a seller, you want to consult a loan officer on whether or not a given purchase offer is likely to be able to be done. Of course, if your agent is a good loan officer, you're already ahead of this game.
Caveat Emptor
Article UPDATED here
(This blast from the past originally appeared June 7th 2006, and it wasn't my first such article. It's still relevant, though. Keep in mind that San Diego has been on the bleeding edge of all of this, so we're likely to start our turn around sooner as well)
The title was the wording of a search engine hit I got. It's not literally a death trap, of course, only much financial pain. But the hyperbole is forgivable in today's modern society and the state of the current market.
Other people may have other definitions of "housing bubble death trap," but when I'm talking about stuff like that, I'm talking about someone who bought too much house with an unstable (or insufficiently stable) loan.
I just picked a couple random streets in older lower middle class neighborhoods, and looked back a couple of years. I found a couple of homes that have sold twice or are on the market again.
A 3 bedroom home sold for $487,000 at the end of last year. It's back on the market now for $425,000. A condo sold for $285,000 at the end of 2004, and again just recently for $265,000.
UPDATE:And the prices on those streets are significantly lower now. The Condos I originally wrote about are now about $180,000.
Now just in case you don't understand, the owner doesn't get the full sale price, but they paid the previous sale price to buy it. Usual seller's expenses run about seven percent or so. So for the 3 bedroom home, the owner is only going to get about $395,000 to pay it off, even if they get full asking price. For the condo, the owner only got about $246,000.
Now, let's consider the sales involved. Either their down payment when they bought the home will cover it, or it won't. If it does, the homeowner is out about $92,000 in the first case, about $39,000 in the second. This doesn't include any prepayment penalties there may be or negative amortization it may have undergone, not to mention the cost of any payments they may have missed, etcetera, etcetera. There's always a reason people sell for a loss, and it's usually because they have no choice. They can't make the payments (and never could) or they have been transferred, have to get housing elsewhere, and can't make the payments. And what if the down payment won't cover the deficit? Well, at the end of the year they are likely to get a 1099 form that says they got income from forgiveness of debts. As I understand it, this is ordinary income, and it can knock you up to higher tax brackets, both federal and state, if your state has state income tax.
UPDATE: a temporary reprieve for this was passed in about September 2007 thanks to the sponsorship of President Bush, but it expires at the end of 2008 and does not appear likely that Congress will renew it.
So why didn't the folks just refinance into something stable, you ask? They couldn't afford the payments on a stable loan. Furthermore, they couldn't refinance due to their situation. If you bought with anything close to 100% financing, and you lose $55,000 of value, well, banks don't like lending money for more than the property is worth. There's no security in it. Now there are were 125% loans out there, but the rate is high and the terms are ugly. If you can't afford the rate at 100 percent, or 95 percent of value, you certainly can't afford the rate for over 100 percent. There are only two times that the value of a property means anything. One is when you buy or sell, and the value is whatever you paid for it, or your buyer pays. The other, alas, is when you refinance, and if you owe $480,000 on the property when similar properties are selling for $425,000, the odds of you getting a better loan with a lower payment are essentially non-existent.
Now if the folks are in a stable loan, and can make the real payments, it doesn't really matter what the property is worth right now. You're doing fine, whether you refinance or not. Refinancing might put you into a better situation, but if you can't refinance, you're still doing okay. Yes, the prices are down and they're likely to go down more. It just doesn't matter if you don't intend to sell and don't need to refinance. Your cash flow is what it is, and if you really were okay with that to start with and the loan is stable, you're likely okay with it now. If you got a loan that was stable for three or five years long enough ago to worry about loan adjustment now (or soon), you've likely got plenty of equity in the property now. If, on the other hand, you did a 2/28 interest only a year and a half ago, then you're potentially looking at a payment adjustment in the next few months that's suddenly two percent higher and fully amortized, which could be thirty or forty percent difference in the payments. Ouch. Out of such scenarios are losing a property to foreclosure constructed, with consequences even worse than the ones I talk about above. Just the act of lender filing a Notice of Default usually adds thousands of dollars to what you owe, never mind any payments you may have missed or been late.
This then, is what I call the Housing Bubble Death Trap. People who bought too much house with unstable loans, then had the market recede a little on them. Now they are upside down (owe more on the property than it is worth) with a loan they cannot refinance and cannot afford, and they can't sell for as much money as they paid.
What are the loans to watch out for if you're buying? Anything like stated income, where you're not documenting that you make enough to qualify for the loan. Stated Income has legitimate usages, mostly for small business folk and those paid on commission, but should not be used nearly so often as it has been, of late. For all the people who have claimed otherwise (and used them for such), I have never seen a situation where I'd recommend any kind of negative amortization loan for the purchase of a property that you intend to live in. Stated Income Negative Amortization loans should scream out to anyone "WARNING, WILL ROBINSON! DANGER! DANGER! DANGER!" Short term (2 year) interest only loans are less clear-cut, but often a bad idea. These are sub-prime loans. I did a lot of 2/28 loans at six percent a couple of years back. They were intended as short term loans until folks' credit improved, and that's the way I explained them, emphasizing that fact that they have to make certain their credit score actually improves during those two years. They're going to be around 8 percent the first six months they adjust, and a $300,000 6 percent interest only has a payment of $1500 per month. If it adjusts to 8 percent and starts amortizing with 28 years left to go, that's a payment of $2240. I have a firm rule of no prepayment penalties longer than the fixed period of the loan, but I'm definitely the exception rather than the rule there among loan officers. If you were paying principal and interest all along, like most of my clients, you've got some breathing room (equity) in your property and the "payment shock" won't be nearly so bad, not to mention that if your score actually went up, you likely qualify A paper now.
UPDATE: And stated income loans are "mostly dead" now, due to the systematic abuse by most alleged professionals. I feel bad for the self-employed and sales professionals who now have a much harder time qualifying for a loan because of it. Yet another instance of the tragedy of the commons: The market is killed by individuals who are all collectively looking for one more commission check right now.
Three year (or longer) fixed rate A paper probably gives you enough breathing room in all but the worst of all market collapses, and I prefer at least five, with thirty year fixed actually being my favorite loan right now, due to the fact that depending upon the lender and the client, I may actually be able to get them cheaper than anything else. This, however, is a short term phenomenon of the moment, due to the yield curve being inverted, and once it straightens out, I'll probably be doing more medium to long term hybrid ARMs again.
Caveat Emptor
Original here
With housing prices having crashed in most of the higher cost areas of the country, many people who were formerly priced completely out of the market have become interested once again in purchasing property. The drawback is that because lenders are scared of zero down payment programs right now, if you haven't got a down payment you are just as solidly locked out of property as if you could not afford the payment, as formerly. So I thought I'd go over the down payment requirements for purchasing real estate. These are minimums. If you have more of a down payment, that's even better. You cut the amount you need to borrow, thereby cutting the payment and increasing affordability still more, and you also quite likely improve the loan you are eligible for.
Right now I would plan on having 10% of the purchase price for a down payment with conventional conforming loans. On a $400,000 property, that's $40,000, which is quite a chunk of change for most folks. This is the "no government involvement necessary" loan, up to $417,000 of loan amount (not purchase price, a critical distinction to make!). If you're putting 10% down on a $450,000 property, what you have is a conventional loan amount - $405,000 - not "temporary conforming" (currently $417,001 to $697,500 in San Diego), not nonconforming, but a full on conforming loan, assuming you qualify on the basis of credit score debt to income ratio and loan to value ratio. I do have a source for loans with only 5% down purchase money loans that seems increasingly solid - but it's only one. One program from one lender can vanish at any time, and there is no Plan B. If that lender pulls the program while we're in escrow, that's not Monopoly Money my clients are risking. It's to be noted that if you're putting less than 20% down, you need a credit score of at least 680 to get private mortgage insurance, without which the loan will not actually fund.
FHA loans have had a recent revision: They now require a 3.5% down payment as opposed to 3%. On a $400,000 property, that's $14,000. On the plus side, the funding fee (Currently 1.75 points) can now be added back in to the loan amount, yielding a 98.25% loan to value ratio when everything is said and done, but you need a 3.5% actual down payment or the deal is off. Furthermore, they have a financing insurance charge of 0.5 or 0.55% on top of your note rate, but better to pay the charge and get the loan you need than not pay the charge and not get the loan.
VA loans really have become the magic bullet. Not only do they not require a down payment at all, but closing costs of the loan (including the VA Funding Fee, if it applies) can be rolled into the loan on top of the purchase price. Furthermore, there's no financing insurance charge, and only very minimal loan adjustments, if any at all.
The good news, to counterbalance the increased down payment requirements, is that prices are much lower. The bad news is that if you wait for the lenders to lower down payment requirements again, prices will be much higher then. You see, it's the difficulty in finding people who can get a down payment that is partially fueling the fall in prices. They're not going to stay this low when that changes.
So how do you take advantage now? Where can you get the money for a down payment quickly?
I'll skim over the obvious and simple candidates: Savings, investment accounts, sell some of your stuff. If you have a spare Ferrari lying around you're not using, that's probably a peachy down payment for just about anything. Just because folks were all wanting to buy without a down payment, to the point where it became unusual for folks to actually have a down payment there for several years, does not mean that doing so is in any way mandatory. But if you are in one of these categories, you probably don't need to hear me tell you that money you have stashed away could be used for a down payment for the purchase of real estate. I'll bet you can figure it out on your own.
So let's look at the non-obvious ways.
Let's start at the least painful, at least personally: Retirement accounts. The tax code allows you to withdraw up to $10,000 from certain IRAs for the purpose of a down payment (talk with your accountant for details). Put two spouses together, and you've got $20,000. That may have been only 3% when properties were $600,000, but when the property is $300,000, $20,000 is almost 7 percent - more than enough for an FHA loan, which anyone who hasn't defrauded the federal government can get..
Second option: 401k and its siblings and cousins 403b, 401b, 457, etcetera. These are group retirement plans where you cannot withdraw the contributions for so long as you work for the company, government, or non-profit. But the majority of these have plan documents that allow those who have previously contributed to take out loans from their balance in the plan and repay those loans from future contributions. Let's say you've contributed $30,000 which has grown to $50,000. The mechanics do vary, but if you take a $30,000 loan and repay it $200 every two weeks from your normal 401 contribution, that's mostly a wash in most cases. Be careful for rules on interest rate charged and method of repayment, but the federal government's Thrift Savings Plan (among many other employer sponsored plans) allows loans for this purpose. Meanwhile, your original contributions may even continue growing. Once again, it depends upon your plan document and everything it lays out.
If your family (or your spouse's family) wants to give you a gift for the down payment, that works. FHA rules specifically allow up to a 6% gift from family members, VA rules are similar even though they don't require a down payment, and even conventional lenders make it easy enough to use family gifts for a down payment. This may seem like a no-brainer, but many times Junior wants so much to do it on their own without help, that they refuse to see a very obvious solution even though it is the best and most painless way under the circumstances. You can always save up the money to pay them back even though it was a gift. Just because it's a gift doesn't mean you can't give them a gift back later; it just means that it cannot be a loan masquerading as a gift.
Many locally based first time buyer programs exist. There programs lend (not grant) you the money for a down payment. In some cases, 20% or more of the purchase price. Most of these take the form of a "silent second" mortgage where there are no payments due, and it you hang onto the property for a certain amount of time, the loans can even be forgiven. The drawbacks are several, but the usual elephant in the room is that these programs run out of money at Warp Speed every time they get a new allocation. I've heard of people who had tried three, four or more times at intervals separated by six months and still couldn't get into these programs due to budget limitations. It can be very difficult to get in on these programs. I applied for one back in April for some clients. Despite the fact that we were less than two weeks out of the starting gate from when the budget allocation had been received, there was nothing left in the program. So even though your loan person may be eager to participate in such a program, the fact that your application is competing with those of many other people may preclude it actually happening.
The final possibility is a personal loan. These can be either from banks and credit unions issuing a fully underwritten loan with market rate interest, or from family members deciding to make a below-market rate loan based upon the fact that they like you. Lenders take a truly large number of precautions to prevent the down payment money from being borrowed unbeknownst to them, but a fully disclosed personal loan, not secured against the title of the property, is perfectly acceptable in most cases. If does impact debt to income ratio, because you've got to make payments on the personal loan as well as the real estate loan, so it does constrict what you could conceivably afford in the way of purchase price. On the other hand, it does put the purchase money in your bank account today, when you need it, rather than two years from now, when there is an excellent chance prices will be much higher by then.
So there you have them, half a dozen possible ways to get a down payment quickly, while it really makes a difference to the home you can afford the payments for because prices are down. Which they are, in part, because people with down payments available to them are so difficult to find. If you need a down payment to buy and neither these not any other method of acquiring one will work, you're just going to have to wait it out until the guidelines are relaxed, or until you do manage to save up the money for the required down payment.
Caveat Emptor
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