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, but I believe my LO handled it pretty well. He responded to the attorney with 2 questions of his own:
- How else would a 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.
- Not all municipalities or jurisdictions charge such fees. Some charge the Buyer. Others charge the Seller.
- 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"?
- 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 the Greater Chicagoland area? Contact Me Today! I'll put my 37 years of Mortgage experience hard to work on your (or your clients') behalf.
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Gene Mundt, Mortgage Lender, a Lender with 36 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, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.
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