Michael Samuels provides legal services to FSBO and other real estate clients in Cincinnati and throughout Ohio.

FSBO and mortgages: What to know

On Behalf of | Oct 5, 2023 | FSBO

Deciding to sell your home for sale by owner (FSBO) means taking on many tasks traditionally handled by a real estate agent. While it gives you more control over the sale, it also comes with challenges. One of the most important aspects is how mortgages affect the transaction. This is crucial, mainly since most buyers will finance the purchase.

There’s a variety of mortgage options that a buyer might use, including conventional, FHA and VA loans. Each comes with its requirements. For instance, FHA loans have strict property condition guidelines. Knowing the types of loans your potential buyers use can prepare you for what to expect.

Understand the importance of pre-approval

When negotiating with a buyer, asking for a mortgage pre-approval letter is crucial. This confirms that a lender has vetted the buyer’s creditworthiness and is willing to offer a loan up to a certain amount. It provides assurance that the deal will likely go through, potentially saving you from issues.

Be prepared for the appraisal process

A significant step in the mortgage process is the home appraisal. The lender will require it to ensure the property’s value matches the loan amount. An appraisal significantly lower than the selling price can be a deal-breaker, as the mortgage company won’t approve a loan for more than the home’s appraised value.

Familiarize yourself with the closing costs

Closing costs are another critical consideration. Buyers might sometimes ask you to cover some of their closing costs. This is more common with FHA loans, which allow up to 6% of the loan amount from seller concessions. You’ll need to decide whether you’ll do this, as it effectively lowers your home’s selling price.

Understanding the mortgage process becomes even more crucial when you’re selling your home independently. Working with someone who can guide you may be beneficial.