Why do sellers care what % you put down?

I mean, if you are approved for a loan that more than covers everything and you have enough cash for what makes the bank happy and closing costs, why does the seller care?

Edited for godawful spelling!

buyers who can put down more $$ are considered a 'safer' option. They're more likely to get the loan and not back out. Its also an indication of whether or not the buyer can really afford the loan (banks will pre-qual for ridiculous amounts that people can't really afford)

Even if you're pre-qualified or pre-approved there's still a substantial process involved to get you to closing. The more of your own money involved, the more likely it will happen.

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Posted by LisaT

buyers who can put down more $$ are considered a 'safer' option. They're more likely to get the loan and not back out. Its also an indication of whether or not the buyer can really afford the loan (banks will pre-qual for ridiculous amounts that people can't really afford)

Even if you're pre-qualified or pre-approved there's still a substantial process involved to get you to closing. The more of your own money involved, the more likely it will happen.

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Some sellers would accept less money for a house for a greater percentage of money down or ALL cash.

I know I am CLUELESS, but I still don't understand:

The bank gives the owners the $$$, right? So what's it to them how much is cash/how much is mortgage?

I don't understand the seriousness/risk argument - once you (the buyer) commit to paying for the house, it's between the buyer and the bank, right?

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Posted by Fran M

Sort of - but the lender has to actually approve the house through their apraisal process. Once a buyer is approved for XX amount the bank has to then look at the house and determine if its worth the amount its investing in. The lender dose not want to get stuck with overvalued real estate. So the more you put down the less risk for the lender the smoother things go in the eyes of the seller.

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Ahha! Finally got it! Thank you!

You can also look at it from the greed point of view too.

More often than not, the sellers are in the process of buying themselves.... your downpayment often times goes towards the costs associated with the purchase of their new home.

I know for my parents when they sold their home on LI for 390,000 they choose the people with a bit of a lower bidding price but the family had 50% to put down.
They wanted out of LI as soon as possible and also since they were selling through Foxtons they knew if they went to contract that first month the commission was alot lower.

So for them the higher downpayment meant
they could be in contract within 2 weeks of putting it on the market and they could close in May since they knew the buyers would have no problem getting a mortgage especially since they had that much saved to put down.

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Posted by matron

For starters people who can only put like 10% down are more inclined to ditch the deal...

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we only put down 5% and we didnt ditch!!
we would be the sellers personal servants if thats what it took to get the house! lol

The down payment really has a say in your appraisal. Plus the more you put down... the 'stronger' your offer.

Even after you get pre-approved... you are always pre-approved 'pending conditions'... and usually those conditions aren't met till a few weeks before closing.

Just because you are so sure you would never back out of a deal... that doesn't mean there are people out there that do.

my parents are going through this now.
they are selling their house, and the people who are buying it agreed to 20% at first....and then after a few weeks decided they'd rather just put 10% down.....and after a lot of the things they've said, and changes they've tried to make....they are appearing to be rather untrustworthy.
so my parents are refusing to take less than 20% from them....becuase there's less of a chance of them walking away from a deal that they've invested a larger chunk of money in.
And my parents will be buying a different house and need the downpayment for that

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Posted by palebride


And my parents will be buying a different house and need the downpayment for that

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This is the ideal way to work it... but don't you find this extremely hard to schedule? Its almost like you have to find that perfect house right at the same time when you find the perfect buyer for your place.

How did they work it out this way?

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Posted by DjPiLL

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Posted by palebride


And my parents will be buying a different house and need the downpayment for that

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This is the ideal way to work it... but don't you find this extremely hard to schedule? Its almost like you have to find that perfect house right at the same time when you find the perfect buyer for your place.

How did they work it out this way?

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well, they're not relying entirely on the buyer's downpayment for their own.....but they want to make sure that when they put down $$ on the house they are buying, they will be gettin it back from the buyers of their house.
Unfortunately, the people buying their house are being incredibly difficult and sketchy....

Yeah I hear that.

And I am also quite familiar with what its like to deal with unreliable buyers. Major PITA.

OK, please forgive me for my thickheadedness !!!!!!!!!!!!!!!!!

So basically the reason sellers will go with a person with a larger down payment is b/c those with a larger DP have a greater chance to actually get the mortgage in the end, after all is said and done???

Conversely, does that mean that these 3%, 5% down programs are very, very difficult to get in the end, after the house has been inspected?


TIA!!!!!!!!!!!

I don't think a larger down payment necessarily means a better chance at a mortgage....but a larger downpayment lets the seller know you are serious about buying the house, so they have more faith that the deal with go through.
If you put less down, then you lose less if you just walk away and the sellers are screwed.