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Premium Pricing with Prosperity Home Mortgage

Are you interested in lender paid closing costs? Increase tax deductions? Reduced appraised value risk?

As we all know, it goes without saying that receiving a great rate is extremely important, but without receiving proper education and guidance regarding a buyer’s needs, wants, and whys, they very well could be making a costly financial mistake in the tens-of-thousands of dollars that’s overshadowed by a visually appealing interest rate.

Team Koki found that the Premium Pricing option through Prosperity Home Mortgage is a great alternative to asking for seller subsidies in an extremely competitive marketplace with tight inventory. This financing option can potentially bridge the gap between buyer/ seller negotiations, give the buyer opportunities for their liquid assets, and ensure comfort levels are not exceeded.

When considering purchasing a home, a buyer may look at their cash to close and be considering short-term ownership plans, limited cash resources, value in conserving cash resources, expected family growth or using your liquid cash for alternative investment interests.

Or, maybe a buyer is under contract and a seller won’t budge on home inspection items, but the buyer doesn’t want to walk.

All loan programs offered at Prosperity allow for a buyer to choose Premium Pricing to assist with their closing costs, assuming they qualify while meeting the program’s guidelines. Premium Pricing allows a buyer to choose an above-market interest rate in exchange of receiving a percentage of their loan amount back as a lender credit to be applied towards their closing costs; essentially financing their closing costs through the interest rate.

Let’s consider a buyer who is purchasing an $800,000 home with 20% towards their down payment,
with intentions to own the property for 7 years. Based on the illustration below, if the buyer was
willing to accept a 0.250% higher rate which equates to $96 additional each month, they may be
eligible to receive 1.5% of their loan amount ($9,600) as a lender credit to be applied towards their
closing costs.

A buyer who chooses Premium Pricing which allows them to conserve their cash in today’s dollar
($9,600 in our example) now creates opportunity cost in funding other important life goals for what
may be zero financial trade-off.

Some of these opportunities could include:

  • home improvements to accelerate their property’s equity position
  • retirement plan contributions
  • funding children’s college savings plan
  • establishing / funding life insurance plan for family
  • diversify alternative investments with liquidity
  • emergency fund (health, employment, vacation, etc.)

The Power or Compounding
Warren Bufiet’s single most powerful factor stated behind building wealth is “Compound Interest”. If the above scenario allows a buyer to keep $9,600 of their cash to do as they please with, grew at a modest 5 percent annual compounded rate of return, the result of $9,600 in today’s dollar would be $13,594 in 7 years —  a 58% return on investment (or 8.28% averaged annually)!!

Thanks Brad and Hunter at Prosperity Home Mortgage for sharing the great opportunity. You can reach them at bradley.katzen@phmloans.com and Hunter.Church@phmloans.com.

~Adapted from a post by Bradley Katzen