The value of a relationship with a verified lender can be the difference between a contract that will not see closing and a successful transaction. It’s the fiduciary duty of the agent to verify and vet the buyer for his or her client. It’s also the responsibility of the buyer’s agent to vet the buyer for the seller’s agent.

I recently had an interesting wrench in one of my transactions that I feel everyone can learn from. Here’s the situation that transpired:

• Buyer was transferring to Cincinnati for a job
• He had a mortgage on an out-of-state house with USAA
• He had a strong amount of money in the bank
• Buyer thought it was in his best interest to use USAA instead of one of my preferred lenders for their home purchase in Cincinnati
• He wanted to buy a house three months in advance so renovations could be done prior to relocation
• 21 days from closing, buyer was informed that USAA couldn’t loan money “unless the borrower is within 60 days of gaining their employment”
• Buyer needed to generate an $20k additional to close with USAA

My client then asked me to delay closing from mid-March to the first of May—and that was going to be a deal breaker. When we wrote a contract for the house, we were in competing offers and ours was chosen because of relationships; both offers were identical.

Then we talked to my preferred lender, Huntington Bank, which has a portfolio product they can offer my client—a physician loan:

• 0% down payment, matching interest rate
• zero Private Mortgage Insurance (PMI)

A homerun from the local group! This information intrigued the buyer, but if the financing was changed this close to the closing, closing would be delayed.

We evaluated each option and decided to stay the course with USAA, the national provider. To overcome the underwriter’s 60 days from gaining employment rule, the buyer had to bring 5% more money to closing, approx. $19,500—a huge expense!

I was fortunate to have a great client with good financial backing who was able to accomplish the transaction and save us from a tailspin that would have resulted in the sellers removing themselves from the contract. The lesson here: Shop your mortgages, but ask the right questions—and work with a knowledgeable agent who can navigate this delicate space.

For great service from a local Cincinnati lender, call Huntington Bank’s Matt Miller at 513-770-2060, email matthew.miller@huntington.com. He has the team behind him to service you for physician loans and more!

The fact is that you’re able to purchase a house with little money down is not a problem, its leveraging debt to income and the Lending environments rule. Leverage is a wonderful thing as long as there is a plan in the background! I would recommend that the person comfortable leveraging the numbers would have a successful financing planner working for their money that is not tied up on the house purchase. Also, I would recommend that the person’s accountant would help advise someone with a low down payment in vetting the plan of execution so that your aware of your path towards financial success.

My issue with clients with 3.5% down on a house is that when you sell a house, you pay 6% or higher. The broken piece is that your transaction costs and your equity in the property could be imbalanced. In this scenario, when you Sell a house you are gambling on the market appreciation or are you only going to take a clients built equity to pay your agent for that professional service? That doesn’t sound like good business!

If you have read my story titled “Is the American Dream, just a dream?” you will have more understanding of the ‘equitable position’ of owning Real Estate. I just had a client in the booming market of Madeira, a suburb of Cincinnati- loose money on a house that they bought in 2010; arguably pre-recovery. On a phone call with the client 2 days before Closing, he said “You know a house is more of an asset if you only do the maintenance, it can be an investment but you need to constantly work to improve it!” That was the best explanation that I have heard to date and I needed to write that down!

In summary, I would recommend that if someone is only putting down a minimal amount of down payment, that they have liquidity elsewhere in their life so that the “big gamble” isn’t on the house. Also, this concept of reinvesting constantly makes you wonder if your debt service to income ratio is low enough that you have monthly cash flow for those stabilization projects. As a rule of thumb, you are supposed to have 6 months of ‘Living’ within an investment vehicle that can be liquidated without major penalty in less than 3 days.

If you read this and want more information or coaching on the correct next steps for you, I would love to have that conversation and refer you to a professional financial planner so that you can make educated buying and selling decisions. No reason not to Win!