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Earnest Money Contracts & Mortgage Lenders

October 9th, 2012

Mortgage Lenders & Sales Contracts

In contract negotiations, no one is focused on the mortgage lender.
The contract & terms often create challenges in lending.

What about contracts matters most to lenders ?
Are there contract best practices that help your client’s loan ?
What makes the sales contract a “ lender friendly” one ?

Earnest Money Contracts:
• Always date your contracts !
• Set reasonable & different timeframes for option & financing periods
• Lenders need the complete contracts & all addendums
• Lenders send the complete contract & addendums to appraisers
• Property appraisals require revision for incomplete contracts
• Seller paid concessions are a part of the appraisal
• Realtor paid concessions are a part of the appraisal
• Property appraisals require revision for changes in paid concessions
• Tell your lender the financing contingency expiration date
• Lenders focus on the closing date, not financing dates
• Avoid contract changes after loan approval

Option Period/Repair Negotiations:
• Clients don’t want appraisals ordered in option periods
• Lenders need all amendments attached to contracts
• Better to handle this with monetary concessions
• Don’t ever reference inspection reports in amendments
• Lender must verify any items listed in amendments!

Quick Resale of Property:
• Reselling in less than 6 months is a lending issue
• Lenders have rules when property resells in 1 month to 6 months
• Appraisal & title work shows the last sale date- don’t wait to tell lenders
• If value has increased over 20%, documentation may be requested.

Following the above steps guarantees you smoother sailing !
Next time you fill out the contract, think on what a lender may need or require.