To be eligible, the borrower will need to meet specific requirements. Also, manufactured housing is not permitted for purchase transactions with a high LTV. The property can only be a one-unit principle residence you can’t purchase a duplex or an investment property that you won’t live in. The ratio for high LTV loans will usually be from 95.1% to 97%, and the loan type will be a fixed-rate loan with terms no larger than 30 years. For loans backed by Fannie Mae, the LTV on purchase transactions can exceed 95%, but specific criteria will be applied. In almost all cases, the lender will want to see a low loan-to-value (LTV) ratio. Requirements for a Purchase Transaction with High LTV Reimbursements or refunds may also be applied. If the borrower receives cash back, the lender will need to confirm that the minimum borrower contribution has been met. The money can also be used to give the borrower cash back for a pro-rated real estate tax credit if there has been an error. This settlement must clearly indicate that this matter has been settled through the refund. However, the borrowed money cannot be used to give the borrower cash back unless it is the amount representing reimbursement for overpayment of fees. The proceeds can also be used to convert a construction loan into permanent financing, or pay off the outstanding balance on installment land contracts. For example, the borrower can use the funds to finance the acquisition of property or both the acquisition and rehabilitation of the property. If these contributions are met, the proceeds from the transaction can be used for many different purposes. There are often different eligibility requirements for various loan products, and these differences will be stated in the specific mortgage loan they should be explained in detail by your lender.įor general purchase transactions, the minimum borrower contribution (down payments) requirements will need to be met. These guidelines apply to many forms of lending, including purchase transactions for a wide variety of properties… Requirements for a General Purchase TransactionĪ purchase transaction, also called a “purchase money transaction,” is a real estate process where the funding is used to purchase the buying of a property or to both buy and remodel or renovate a property. However, Fannie Mae has specific details for loans, and lenders who wish to have their loans purchased by the real estate giant need to make sure their loans fit into specific guidelines. They create greater confidence for lenders, which means more available money for borrowers. By purchasing loans on the secondary market, Fannie Mae ensures a readily-available supply of money for borrowers. If you are looking to complete a purchase transaction for a piece of real estate, you’ll need to make sure that you meet specific requirements, especially if the loan is going to be supported by Fannie Mae.įannie Mae, a government-backed company, provides financial support for the American real estate industry, which is generally viewed as an important part of quality-of-life standards.
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