Knock Lending - Is It Right For You?
You may or may not know about home swap lending but it's become increasingly popular in today's competitive market. This is due to the fact that it's hard to purchase a home when you still have to sell the one you are currently in.
When purchasing a home while also trying to sell one, oftentimes buyers will need to make their offers "contingent" on their home selling. This is mainly due to financial constraints with the buyer not being able to qualify for the loan of the new home before selling the old one.
The problem arises when it's a competitive market and you often see multiple offers on the property. For example, why would a seller take a "contingent" offer over another non-contingent one, assuming they are similar in price. It is way too risky for the seller to wait for the buyer to sell their existing home.
Enter, Knock Lending. What knock lending offers, is the opportunity to qualify for the loan of the new property without selling your old one. Here are a few ways you can use Knock lending.
Knock Loan Types
There are 3 different ways you can use the Knock lending program. They can all be used in coordination with each other or you can simply use one or two of the loans. Everyone's situation is different.
6 Months Old Payments
Knock gives the borrower a loan to cover up to 6 months of their old mortgage payments. This allows the buyer to qualify for the new loan and affords them the ability to make a non-contingent offer on properties of interest.
$25k For Preparation To Sell
The second loan option would be to take a loan in order to ready the home for the KNOCK market and improve the potential sale price. If you need to reach a certain amount of equity in the home when selling it, making upgrades to the property before you go live on the open market is a great way to capture a higher value and net more money.
20% Down Payment Or Closing Costs
The loan for the new home will, of course, require a down payment and you will have closing costs associated with the new transaction. With your equity tied up in the old property, this would be a good option to take advantage of while not having to sell prior to qualifying for the new loan.
New Loan Requirements
When using the Knock program, there are a couple of stipulations that come with the loan options.
- Must be conforming to a conventional loan
- Knock has a 1.25% Fee (Based on purchase price)
- No 1% Origination Fee
- Must be a 30-day close of escrow offer
- Can offer up to 14-day leaseback
Home to Sell Requirements
- The homeowner will need to agree to an offer at 85% of the current market value with Knock company.
- If the home doesn't sell after 6 months on the market, the 85% offer will be used to buy the home.
- Ideally, the homeowner will have 30% home equity or more.
- The title company used will need to know about the Knock program.
If you are needing a Home Swap loan, REACH OUT to us for more information, we would love to be your real estate resource!
