I’m not sure if you know about this program, but it is a good one! It’s available and it can help you get into that new house, or make it more attractive for someone to buy your house. The Federal Housing Administration, (FHA) has increased its loan limits in Flathead County to $301,250, from a previous high of $225,000. As the prices of houses have increased the last few years in the Flathead, many buyers have been left hanging, wanting to buy, but just out of reach.
FHA loans are backed by the government and the purpose is to help marginally credit challenged folks, whose credit is just out of reach of traditional lending programs, but have a great track record of paying rent or housing payments on time. These loans are 97% financing with only a 3% down payment required by the buyer plus closing costs.
Here is the real exciting part; there are non-profit companies, which work hand in hand with lenders to match up buyers’ needs with incentives for sellers. These non-profit companies have programs where the seller can “gift” money to the buyer, to help a qualified buyer with the 3% down-payment and closing costs. Sellers, if you choose to “gift” money to the buyer under this program, you will receive a tax deduction because the seller is really donating money to a non-profit, which then gives the money to the buyer. “The program is real simple, and has been around for sometime, the exciting part is that the loan limits have increased tremendously for Flathead County”, said Vanessa Addams with Wells Fargo Home Mortgage.
Here’s the strategy. Say there is a buyer for a house which is priced at $285,000. The buyer is qualified, but really watching their money and negotiating hard for every dollar, because we all know that after you buy the house, you still have to buy furniture, decorate with your colors, buy a lawn mower, new coffee maker etc, and it all adds up. If the seller says, Mr. Buyer, instead of you coming up with the down payment or a portion of the down payment, (1%,2% or 3%), how about I “gift” it to you? Now the buyer feels more comfortable to move forward, because the seller just alleviated some cash requirements for the buyer, and also, got that buyer off of the fence and committed. The seller gets their house sold, and receives a tax deduction for the amount of the gift, something we all could use. All of this is documented, with specific language, in the buy sell agreement.
Now, of course I can’t write about “gift money” and financing aspects without having some type of disclosure, so I will say please contact a mortgage professional, who is familiar with this program, and it might be a good idea to check with your CPA. In good markets and slower ones, there are always people wanting to buy and sell. Sellers, here is a strategy that can get you to where you want to go. And buyers, if the end result is to get into a house, think smartly about this program.
Contact Chris Fraser for real estate questions at 406-471-3519 or email [email protected].