Loans From the Seller’s Perspective

Reviewing four different types of loans and how sellers view them.

 

With the market being so competitive, homeowners have options when it comes to selling their homes. In many cases, listings that go on the market on the weekend get up to 20 offers by Monday. We review those with our sellers, and cash is not always the deciding factor. Sometimes, it’s the loan type. Today we’ll go through each loan type and give you an overview of how sellers see them:


1. Cash. Cash isn’t always king. It’s important to look at the details of every cash offer. With cash offers, the buyer has the right to get a traditional mortgage. With cash offers, the buyer has the right to get a traditional mortgage, which provides them with a few additional rights.. These can be complicated and can also be one of the reasons why cash offers fail. It’s traditionally used with investors, not homebuyers. Do they still want an appraisal, or are they waiving it? What’s the timeline for that appraisal? If the appraisal box is checked, they have the right to terminate the deal if it does not appraise.


2. Conventional.
A buyer with a conventional loan is traditionally a stronger and more favorable buyer than one with FHA financing. This type of loan comes with a few benefits. They can usually close faster, but that depends on the lender. Conventional loans also require a stronger credit score and a lower debt-to-income ratio, which is the reason why they’re a more secure buyer.

 

“Conventional buyers are considered a stronger option than FHA ones.”

 

3. FHA. This is a federally backed loan, and it’s good for first-time buyers. FHA loans tend to have a slower process and usually need more time to close. They allow for lower credit scores and higher debt-to-income ratios, so the buyer may not be quite as strong. The appraisal is not due until the day of closing unless otherwise stipulated in the contract, so you may not close on time, either. They may also require additional work on the home. If the FHA appraiser finds issues, the seller may be obligated to do some of those repairs, which can be expensive.


4. VA. This type of loan is designed for veterans and their families. It comes with some very similar traits to an FHA loan. It’s a slower process, and VA loans typically need more time to close. Like FHA mortgages, they may also require the seller to do some additional work to the property.

 

It’s important to know this information and discuss it with your sellers when reviewing offers so they can make a well-informed decision. If we can answer any questions or there’s a topic we haven’t covered, please let us know by phone or email. We’re happy to help.