Why Do Lenders Require a Real Estate Contract?

     

Why Do Lenders Require 

a Real Estate Contract?

     One of the Loan Officers in my office had a Seller's Attorney recently ask him ... 

     "Why does a Lender need a copy of the Real Estate Contract?"

     Admittedly, I was somewhat taken aback by this basic question.  First, because it was an indication that this attorney was unfamiliar with this request.  

     Secondly, it made me wonder ... how many real estate transactions had this attorney performed?  (Clients take note:  Make sure the attorney you hire to assist you with your real estate transaction has in-depth experience in real estate transactions.)

    I believe my LO handled the question asked by this attorney pretty well.  He responded with 2 questions of his own:  

• How else would a Mortgage Lender be able to confirm the actual terms of a real estate sale?
• What Appraiser would accept an Appraisal Order without receiving a copy of the Contract in a Purchase Transaction?

     Below is what Fannie Mae has to say regarding this issue:

     Fannie Mae's policy is intended to help ensure that the appraiser is aware of all relevant aspects of the transaction.  The sales contract provides important sales and financing data, including whether there are any concessions as part of the transaction.  

     If the contract is amended, the Lender must provide the updated contract to the appraiser to ensure that the appraiser has been given the opportunity to consider any changes and their effect on value.  If the appraiser determines that there is no impact to value, then no additional commentary is required from the appraiser. 


      This fact may be unknown to clients and others within a transaction:  But when a Mortgage Lender prepares a Loan Application and/or Good Faith Estimate for a Purchase Transaction, they MUST correctly disclose the effect of Real Estate Transfer Taxes, as dictated by the terms of the Contract.     
     

     
     Participants within a transaction must be aware that:  Every transaction is uniquely agreed to by the parties involved ... and every community, county, and state is different in this regard. 

     Facts are:

1.  Not all municipalities or jurisdictions charge such fees.  Some charge the Buyer.  Others charge the Seller. 
2.  Entities such as Fannie Mae, Freddie Mac, FHA, VA, and others simply are exempt from paying Transfer Taxes.  

     Lenders and Appraisers need to know:

• Are there any Closing Cost Credits?
• Are there any Concessions being offered by the Seller?
• If Concessions are involved, do they impact Value?
• Is the transaction an "Arms-length Deal"?       
  

     and very importantly, they also need to know:

• Contingency dates for financing
• Closing Dates
• Real Estate Tax Proration Agreements
• Names of the participants in the transaction, including but not limited to the obvious ones 

     
     The Lender's ultimate task is to Close the transaction and provide the funding.  But in order to do that ALL the relevant data must be made available ... and/or be tracked down. 

     It's important to be aware and understand why this information is needed.  It's more important to comply.  The financing process will meet challenges and delays if the information is missing ... 




     *  Hoping to Buy a home in New Lenox - Will County, the Greater Chicagoland area/IL/WI?

     Contact Me Today!  I'll put my 40 years of Mortgage experience hard to work on your (or your clients') behalf.
     I'm easily found at:

Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI Lic. #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct:  815.524.2280

Cell/Text:  708.921.6331

eFax:  815.524.2281

gmundt@goapmc.com

www.genemundt.com

 

              

            

Gene Mundt, Mortgage Originator, an Originator with 40 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:  
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago 
and the greater Chicagoland region including:  The Lincoln-Way Area, 
Will County, (New Lenox, Frankfort, Mokena, Channahon Manhattan, 
Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), 
DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI. 

Referrals are Welcomed!