Real Estate

How to help cash-strapped buyers overcome financing hurdles

For some homebuyers, down payment assistance can prove to be a game-changer. Here’s why, at the very least, real estate agents should familiarize themselves with affordable financing options for purchasing a home.

Homesellers prefer conventional financing with large down payments, especially after their Realtor tells them it’s the best approach. In a seller’s market — where there is little, if any, negotiation — Realtors will sometimes recommend one offer over another based on the loan type and the source of the down payment or closing costs.

Housing has become unaffordable for many, but there are various government programs designed to make housing a little more achievable. Some provide funds that will cover down payments or closing costs.

Here in Minnesota, we even have a special line in our purchase agreements where buyers have to state if they’re using a grant, bond or other loan assistance program. There isn’t a line for a gift from granny or funds from a 401(k) or savings account.

There isn’t any business reason to reject or accept an offer based on where the down payment is coming from, especially if there’s a letter from a lender and the buyer isn’t asking the seller for help. The truth is, homesellers rarely know anything about home loans. They rely on their Realtors for advice.

Seller’s agents have never asked for proof of funds when the buyer is offering 20 percent down. The preapproval letter and maybe a call to the lender is all that’s needed. It should work the same way with the various grant and assistance programs.

I would love to see some statistics on how often purchases that involve down payment assistance fail compared to purchases where the buyer is getting a gift from relatives or when they use their own funds. What are the risks to homesellers?

It would also be nice to see some facts and figures around FHA loans. I’m comfortable making decisions and recommendations based on data and on facts. An experience a Realtor or someone in his office once had with a property and a buyer many years ago should not be the only criteria used to evaluate a home loan.

Both buyer’s agents and seller’s agents say the darnedest things about various types of financing. There are legends and mythologies — and that one situation that occurred years ago in a different city that caused a “deal” to fall through.

FHA is a wonderful program for cash-strapped homebuyers. My husband and I used the program when we bought our first house. We also received down payment assistance through the city in the form of a silent second mortgage that became a grant after certain conditions were met.

With the FHA loan, we were able to buy with a lower down payment. We didn’t have a lot of cash. The mortgage payments were $20 a month higher than what we had been paying for an apartment with half the space, fewer beds and baths, and no backyard.

Down payment assistance programs are game-changers too. I’ve never had a closing derailed because of a closing cost or down payment assistance program failure. If I am the listing agent, I always contact the lender if I don’t understand the program, so I can explain it to the sellers.

Some sales have to be cash, mostly cash or conventional financing with larger down payments. That said, I like to consult an expert, preferably a lender, because I’m not an expert on every kind of financing.

In a multiple-offer situation, I do my best to “sell” my client’s offers. This is extra tough during a strong seller’s market. There is no opportunity to negotiate. It’s hard to overcome some of the unfair biases agents have that they pass on to the homeowner.

Before I put one of those little old houses on the market, I discuss financing with the owners. I give them handouts about down payment assistance programs and FHA financing. I’m surprised at how often homeowners will tell me that they used a down payment assistance program or an FHA loan, and that they like the idea of someone else having the same opportunity.

It’s also worth noting that there isn’t any type of financing that’s guaranteed. Cash offers fall through, too. There isn’t any way to protect homeowners from a buyer’s job loss, an inspection that goes south or buyer’s remorse when the buyers offer ridiculous amounts of money as they compete with 20 other people for one starter home. There isn’t any way to protect a seller from a buyer’s gambling addiction, either.

In short: Preapproval letters should be just as valid for one type of loan as they are for another.

At the very least, we should give our homeowner clients the facts about different types of financing and provide them with statistics. We should let them make their own choices. We should talk to lenders and ask questions. We owe at least that much to homebuyers.

When working with buyers, we should always make ourselves familiar with their financing and be prepared to pitch it to the seller’s agent and send information for the sellers. That is part of the job.

Your county, city or state may have funds to help homebuyers. Do a little research, and help someone buy a house.

Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of

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