When it comes to seller contributions, the real estate and mortgage industries are well overdue for a new way of thinking. That’s because the majority of agents (and buyers and loan officers, too) simply think the only use for seller contributions is to cover closing costs, and that means you’re missing out on a tremendous opportunity to help your buyer.
Many don’t realize seller contributions can be used in a variety of ways that can increase a buyer’s purchasing power or help them lower their monthly payments.
In the following scenarios, if a buyer with a 760 FICO score and 5% downpayment had opted for a 30-year fixed rate conventional loan with mortgage insurance (MI) and used the seller contribution to either buy down the interest rate or pay the MI premium in cash as a one-time fee at closing, they would have gained more than $50,000 in purchasing power for the exact same monthly payment.
Buying Down the Interest Rate
In this example, the buyer opts to use the seller contribution to buy down the interest rate to 4.75% and gains $55,105 in purchasing power.
Paying the MI Premium in Cash
In this example, the buyer opts to use the seller contribution to pay the MI premium in cash as a one-time fee at closing and gains $52,315 in purchasing power.
In this limited and very competitive market, it’s important to find a way to differentiate yourself. Being a knowledgeable resource for your buyers on all aspects of the home-buying process can help you accomplish that more successfully. Just by outlining the opportunities to better leverage seller contributions and pointing your buyer to their loan officer to discuss the options, you can increase your value, your sales and your referral business.
Brien McMahon is chief franchise officer of Radian Guaranty Inc. More information may be found at www.radian.biz.