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February 23, 2011

Guidelines For Earnest Money and Down Payments, Part 2 of 2

Hi Folks,

   Welcome back here on this last day of the week.

   In part 1 of this 2-part series, we defined and discussed "Earnest Money", and today, we will do the same thing with "Down Payments".

   A Down Payment, as most of you know, is an amount that is "put down" towards the total purchase price of a home. This amount can vary by state, type of loan program, and the type of deal. We'll look at some real-word examples of this today.

   Joetta Talford, a Realtor with Keller Williams Realty in Fort Mill, South Carolina, suggests that you, "Make sure you figure out how much your closing costs will be and if you either have enough for your closing costs or the down payment.", and that, "If you don't have enough for both (i.e. Other house on the market, ask for help with closing costs), Be honest with your agent and they can really try to get it worked out on your behalf." Adam Cowgill, A Sales Associate/Realtor, says that any down payment today, "should be a minimum of 20%; sellers are aware of the present lending crunch and the likelihood that you will get a higher LTV than 80% is gone like the boom of yesterday."

   Jeff Tufford, a Mortgage Consultant, says that down payment amounts will be, "program driven". Most folks put the least amount down allowed, whether that is $0 or 20% for an investment property."

   Down-payments depend on, "whether the deal is lender-financed, or seller-financed", says Patrick E. Hudson, a Commercial Real Estate Attorney in Texas.

   Hudson says that in a lender-financed deal, "the buyer needs just enough of a down payment to persuade the lender to make the kind of loan the buyer desires. My advice is for a buyer is to determine what kind of loan they want, and will be able to get, before they shop for homes, and let that determine the down payment amount. The seller should not care about the down payment amount, as they get paid the same regardless of the source of funds." In a seller-financed deal, "it is essential to get enough money up front to (a) weed out deadbeats; (b) cover the costs of foreclosure; and (c) cover damages that may be caused by a defaulting buyer. This defensive position ensures that if everything goes wrong, the seller has enough money to get the house back and restore it to a good condition."

   In terms of down payment amounts in regards to home home builders, Talford says, "There are certain national residential builders that ask for 3.5% down or more before they begin the process of construction.", and that, "A custom home builder will ask for 10% down before they build. But everything in real estate is negotiable, especially if you have a home to sell or need to pay more for closing costs."

Have a Great Day, and Happy Rent-to-Owning !
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

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