Deal Saver: The Balloons
Updated: 23 hours ago
Story: “I'm under contract on new construction and set to close in 3 weeks. The builders lender just told me I cannot get the loan since I have two hard money loans that will both balloon in about 4 months. They were offering me incentives that had my cash to close at $24k all in with my downpayment. If you can help, without the incentives I don't think I can make it work."
Problem: Two problems. One, having a balloon (let alone two) coming due in the next few months would scare any lender,… especially if you dont have the cash funds to pay them. Two, going with an outside lender, even though the builders lender preapproved them and couldn't close it… they wouldn't offer any incentives.
Solution: Technically, there isn't any specific guideline on Conventional or FHA that prohibits lending to someone with a balloon coming due. If they were self employed, there would have been trouble however. Since they needed cash help on the funds to close, we were able to use our downpayment assistance (even though they were NOT first time buyers) and the realtor stepped up big to contribute a BTSA to the pot as well. We had to have them pay off one big credit card of $20k to get the deal done for ratio purposes (which also took $800 off debt a month off their books) and in the end… they got BACK nearly $5k of the $7k of earnest money they put up & wound up with a $500 LOWER monthly debt load than they were expecting since they got rid of that high interest credit card.
This was a tough deal, even riddled with even income loss 5 days prior to closing! But, in the end, there was a plan all along for this client and overall,.. it all worked FOR him not TO him :)
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