Every deal is an opportunity to learn. This deal taught me a lot. I will try to touch on the few take-aways I felt would impact the most people in the future: Owning two homes, Seller Credits, Dealing with the Feds and the paper trail.

Owning two homes: This particular seller owned a home out of state. They chose to keep this home as a rental when they moved away. They moved to the Madison area 7 months ago. It used to be that rental income could be used to qualify you for a loan. Approx. 75% of that income could be applied to your debt to income ratio. It still can, IF you have been out of the home for more than a year. IF you have not operated that property as a rental for more than a year the underwriters will ask to see nto only 6 months cash reserves for your new mortgage, but 6 months cash reserves for your rental property as well. With the rising number of people renting versus selling, the underwriters see a new rental as a delayed liability rather than an asset.

Seller Credits: Beware offers of large seller credits. This seller (Freddie Mac), offered up to 3.5% seller credits. Our offer stated the credits could be applied to escrows and pre-paid items. Freddie Mac (the lender) would not allow a credit of that size, allowing only 3%. They also pick and choose which items might be included at their whim. Had the buyer been invoiced for the home inspection, appraisal, and rate buy down rather than paying them outside of closing (POC), they would have allowed them, but as they were paid already the buyer could not get the credit.

You can see that dealing with a pseudo federal agency has its pitfalls. One hand does not agree with the other. You will also be forced to move through their system in their way. If your buyer is anxious or nervous about deadlines, binding acceptance and the like you will go mad. Your original offer becomes merely a letter of intent. They then provide subsequent documents that supersede many of the original offers terms and should be studied carefully. While they do move forward in good faith and have no reason to default, following the letter of the law, or the contract in this case is not a strength.