In response to uncertain market conditions due to the Covid-19 pandemic, some major institutional lenders may be changing their lending policies, including capping the loan-to-value ratio they are willing to approve. This is important to keep in mind on both sides of a real estate transaction, before getting into contract. Purchasers should discuss loan parameters with their loan officer, and speak with their attorneys regarding the protections of a financing contingency. Sellers may want to consider limiting a purchaser’s financing contingency to less than 80% of the purchase price, or add a contract provision obligating a purchaser to apply to a second lender if the purchaser can’t get a commitment for the maximum loan amount in the contract.
May 29, 2020