Executive Summary:

This briefing document outlines the key features and benefits of Shining Star Funding’s “Buy Before You Sell” loan program, as described in the provided excerpts. This program is designed to assist homeowners who wish to purchase a new property before selling their existing one, addressing common hurdles such as limited funds for a down payment and potential debt-to-income (DTI) ratio issues. The program allows borrowers to exclude the full monthly obligation of their departing residence (including HELOCs) from DTI calculations under specific conditions.

Main Themes and Important Ideas:

The core theme of the “Buy Before You Sell” program is to bridge the gap between buying a new home and selling an existing one, offering a solution for homeowners facing logistical and financial challenges during this transition.

Key Features and Benefits:

• Addresses Limited Funds for Purchase: The program directly tackles the issue of needing funds for a down payment on a new property while equity is still tied up in the current home. By facilitating the purchase before the sale, it potentially allows borrowers to move without the contingency of selling first.
• Unlocks Down Payment from Existing Home: Implicitly, the program allows borrowers to leverage the equity in their current home to fund the down payment on the new property. While not explicitly stated how this is achieved, the “Buy Before You Sell” approach suggests a temporary financing solution that is repaid upon the sale of the original residence.
• Mitigates Debt-to-Income (DTI) Issues: A significant advantage of this program is its approach to DTI calculations. Borrowers can potentially qualify for a new mortgage even while still carrying the mortgage on their existing home.
• Exclusion of Existing Home’s Monthly Obligation: The program allows for the exclusion of the “full monthly obligation of departing residence along with any HELOC” from DTI calculations.
• Condition for Exclusion: This exclusion is contingent upon a “signed letter of intent stating that they intend to list the departing residence for sale within ninety (90) days of closing subject transaction.” This creates a clear expectation and timeline for the sale of the previous property.
• Eligibility Requirements: The program has specific eligibility criteria:
• 20% Equity Required: Borrowers must have at least “20% equity required in departing residence.” This likely serves as a safeguard for the lender.
• Additional Reserves: In addition to the equity requirement, borrowers need to have “additional reserves,” the specific amount of which is not detailed in the provided excerpt.

Quotes from Original Sources:

• Regarding the core problem:
• “Limited funds to purchase new property?”
• Highlighting the solution for down payment:
• “Unlock down payment from existing home”
• Addressing DTI concerns:
• “DTI Issues?”
• The key DTI benefit and its condition:
• “Exclude full monthly obligation of departing residence along with any HELOC with ONLY signed letter of intent stating that they intend to list the departing residence for sale within ninety (90) days of closing subject transaction”
• Eligibility criteria:
• “20% equity required in departing residence & additional reserves”

Additional Context from Shining Star Funding’s Website:

The Shining Star Funding (SSF) website provides a broader overview of their services and loan options. While it doesn’t offer specific details about the “Buy Before You Sell” program in the provided excerpt, it highlights their commitment to various home buying needs, including:

• Exploring Home Buying Options: Offering solutions for first-time homebuyers, second homes, investment properties, and fixer-uppers. The inclusion of “Buying and Moving” as a category suggests they cater to clients in this specific transition.
• Wide Range of Loan Programs: SSF offers conventional loans, VA loans, FHA loans, down payment assistance programs, and “Alt Doc Loans,” indicating a flexible approach to lending.
• Resources for Homebuyers: The website provides resources such as down payment assistance information and homebuyer guides, suggesting a focus on educating and supporting their clients.
• Emphasis on Consultation and Pre-Approval: The website encourages potential borrowers to “Apply (with Soft Credit Check)” to get pre-approved and offers the option to “Schedule Consultation,” indicating a personalized approach to understanding client needs.

Implications and Considerations:

• Attractive for Homeowners in Strong Markets: This program could be particularly appealing in competitive housing markets where buyers need to act quickly and may not want to wait for their current home to sell before securing a new one.
• Risk Mitigation for Lender: The 20% equity requirement and the expectation of listing within 90 days likely serve as crucial risk mitigation factors for Shining Star Funding.
• Potential Borrower Benefits: Borrowers can avoid the stress of living through showings, the uncertainty of sale timelines, and the potential need for temporary housing.
• Importance of Quick Sale: The success of this program for the borrower hinges on their ability to sell their departing residence within the 90-day timeframe outlined in the letter of intent. Failure to do so could have financial implications.
• Further Information Needed: The excerpts provide a high-level overview. Further details on interest rates, fees, specific reserve requirements, and the mechanics of the temporary financing would be necessary for a comprehensive understanding.

Conclusion:

Shining Star Funding’s “Buy Before You Sell” loan program appears to be a valuable tool for homeowners looking to purchase a new property before selling their existing one. By addressing common financial and logistical hurdles, it offers a potentially smoother transition between homes. The key condition of a signed letter of intent to sell within 90 days, along with the equity and reserve requirements, establishes a framework for the program. Further details from Shining Star Funding would provide a more complete picture of this offering.