Home Financing Guidelines For Simultaneous Closings4 Things You Should KnowNovember 21, 2008 By: Keith S. Donald  Home financing using simultaneous closings, has gone through some major changes. For example, with few exceptions, table funding or simultaneous closings just don't happen right now. It should not be surprising when you think about it. After what has happened to the housing market we knew there would be changes in the financing. When the sub-prime mortgage problems extended to the financial and credit markets there could be no doubt that major qualification changes were in store. Briefly, simultaneous closings are two real estate closings that are scheduled in very close proximity to each other. One is conducted with the property seller and their investor/buyer. The other is conducted with the property buyer and their investor/seller. While the closings may not actually be conducted simultaneously, they are so close to one another the term is appropriate. The normal interval between simultaneous closings is a few hours to a few days. The idea is for funds from the property buyer to be used by an investor to purchase the property from a property seller. When done correctly an investor could actually purchase property without having cash of his or her own in the deal. Two closings scheduled within one hour of each other could actually work funding miracles when correctly done. Now, home financing guidelines have changed dramatically. In fact right now banks are not lending and borrowers are not borrowing. Even the promissory note buyers have changed their underwriting guidelines. There are four qualifications these investors look for. They look for home equity, note seasoning, credit score, and performance. Home Equity Home equity is also known as "skin in the game". You can forget about little or no money down by the borrower in today's marketplace. It is the absence of protective equity by borrowers that has contributed in large part to the financial crisis our country, and the world is involved in today. When home equity is involved, the more you have the better off you are. Conventional lenders only want borrowers with 20% or more equity in their home financing deals today. Even good credit borrowers are expected to put 20% or more into their mortgage transactions. By contrast, promissory note investors are more flexible, but borrowers must have at least 10% in down payment funds and a strong credit profile to qualify. Here is more detail about the four home financing qualifications note buyers are looking for. Note Seasoning Note seasoning refers to a promissory note that has a monthly payment history. The amount of acceptable seasoning will vary from one buyer to another. The accepted period may be as short as three months or as long as one year. The seasoning requirement makes it virtually impossible to conduct simultaneous closings today. Credit While a credit score may disqualify a buyer instantly with a conventional lender, a score of at least 620 will generally work with seller financed promissory notes. One of several benefits of owner financing is the flexibility to work with a buyer regardless of their credit score if they put enough equity into the deal. Performance The fourth home financing criteria expected by lenders today is a performance record. You have heard the saying, "It's not what you say but what you do that matters." Another major benefit of seller financing is an opportunity to do what you say you will do. In essence your destiny is in your hands. All you have to do is make your payments on time, take good care of the property, and fulfill your obligations. When you decide the time is right, you can refinance the property for better rates and pull some equity out of the property as well. Even though simultaneous closings are not currently available for home financing in many markets, you can still take advantage of the opportunities available with seller financing. The four qualifications discussed above answer the needs of the current mortgage markets. Do what you must when times are unstable. Adjust, adapt, and improvise. Home financing with simultaneous closings has changed. See how you can still benefit here.
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