Protect Your Transaction is a program from AmeriFirst Financial Corp that hands out $10,000 to buyers if their transaction doesn’t close (sellers, pay attention). AmeriFirst is guaranteeing that their buyers are not only pre-qualified, but are fully qualified for their loan before they even put an offer on your house. This ensures a rapid closing and a guarantee that their loans will not only close, but close on time, and they are putting their money where their mouth is, and $10,000 of it to boot.
How Does it Work?
Ordinarily, when a buyer puts an offer on a house they submit with their offer a copy of a deposit check, their credit scores, a bank statement showing enough funds to close the transaction, and pre-approval letter from their lender. Getting pre-approved for a home loan means pulling credit and having those scores and debts submitted onto a loan app and sent through an automated desktop underwriting system. It’s a preliminary step saying the buyer meets certain guidelines, but that buyer has yet to have a loan submitted to an actual underwriter for review.
When a buyer has a PYT guarantee, they submit with them the same package as a pre-qualified buyer, but with them they’ll have a full loan approval and PYT certificate to give to escrow. This means that their loan has been looked at and approved by an actually underwriter and that they are credit approved (fully approved for the loan). The only thing left to do is submit to the underwriter a property address via the purchase contract, and to submit an appraisal. The turn-around time for an appraisal these days is about a week, then it’ll take another 3-4 days for final approval from the underwriter before the loan is funded and the transaction is closed.
As you can see, this step is much faster from a Seller’s point of view. The initial gathering of buyer’s pay stubs, tax returns, bank statements, verifications of deposit & rent, etc, then putting the loan package together and submitting to the underwriter takes a good 2 weeks, so if the buyer is doing this ahead of time, the transaction time is roughly cut in half. This is how the lender is able to not only guarantee that the loan will close, but that it will close on time.
Benefits for Sellers
For sellers, accepting a deal with a buyer with a PYT certificate is a no brainer. If a transaction falls apart with a buyer without PYT, sellers lose weeks of marketing time and gain the perception from other potential buyers that there may be something wrong with their home. Additionally, sellers may be forced to sell at a reduced price once the initial listing demand for their home dissipates.
Now if that same transaction falls apart with a buyer backing their transaction with PYT, the buyer’s lender will pay for this lost time. The buyer will receive a PYT certificate from their lender which then will be given to escrow along with instructions on how to divvy up the funds should a deal fall apart. All these funds can be give to sellers, or just a partial amount as buyers may want to protect their appraisal, home inspection, and credit report costs. For sticky transactions that do not end well, this could mean saving you time fighting over the deposit, or possibly seeing an arbitrator. Sellers: Don’t be afraid to have your Realtor cross-qualify buyers for PYT.
Benefits for Buyers
In high demand markets, the competition for homes can be fierce. If sellers are smart, they won’t necessarily accept the highest offer (property may not appraise), but they’ll choose the offer most likely to close.
There are several things sellers and their agents look for in choosing one offer over another:
- Credit Strength (credit score)
- Amount of Deposit/Down Payment
- Time of Escrow
- Funds in the Bank
Presenting a seller with a PYT will cover all of these concerns. Credit strength isn’t an issue if you’re already credit approved for your loan. If you cannot afford much for a deposit, a PYT essentially can add up to $10,000 to your deposit and it makes your deposit look “non-refundable”. A PYT also shortens the time of escrow, competing with the 10-15 days short escrows that cash offers provide. And lastly, your amount of funds in the bank are a non-issue if the lender’s underwriter has already reviewed your financial statements and are guaranteeing you have enough funds to close the loan. Additionally, a PYT can protect your appraisal, credit, and home inspection costs should your loan not fund. Presenting a PYT will significantly boost odds of your offer getting accepted by sellers.
For More Information
Contact Yvette Godfrey-Brown
Direct: (951) 335-8140
AMERIFIRST FINANCIAL, INC.
4210 Riverwalk Parkway Suite 120, Riverside, CA 92505