If the borrower’s currently owned home is listed for sale but has not been sold, the lender may qualify the borrower on the basis of anticipated sales proceeds.
The lender must document the actual proceeds received by the borrower.
The following table describes how to determine the amount of net proceeds based on a borrower’s anticipated equity.
|Sales Price Established?||Net Proceeds Calculation|
|Yes||Sales Price – (Sales Costs + All Liens) = Estimated Proceeds|
|No||90% of Listing Price – All
Liens = Estimated Proceeds
Note: The 10% adjustment factor that is applied to the listing price must be changed depending on market conditions.
If the proceeds from the sale of a currently owned home are needed for the down payment and closing costs on the new house, the lender must verify the source of funds by obtaining a copy of the settlement statement on the existing home before, or simultaneously with, the settlement on the new home, showing sufficient net cash proceeds to consummate the purchase of the new home.
Assets for the down payment from a “like-kind exchange,” also known as a 1031 exchange, are eligible if properly documented and in compliance with Internal Revenue Code Section 1031.
When the borrower’s employer assumes responsibility for paying off the existing mortgage in connection with a relocation plan, the lender must obtain a copy of the executed buy-out agreement to document the source of funds. A photocopy of a sales contract or a listing agreement is not considered an acceptable source of verification of proceeds from the sale.
The table below provides references to the Announcements that have been issued that are related to this topic.