It’s easier to borrow less money than more…  Right?  The answer, like so many answers in NYC real estate, is not so simple.  Consider the following.  You have a listing and multiple offers are coming in.  The seller prefers one bidder far more than the rest, and wants to pursue their offer.  But they need a financing contingency and the seller understandably is reluctant to accept that risk.  You suggest the following:  let’s give the buyer a contingency, but not for the 80% LTV they request, we will give the buyer 60% LTV contingency.  So if the buyer wants to finance more, fine, but if they apply for 60% and get financing, they must proceed even if they can’t ultimately get the 80% they desire.  You explain to the seller that the buyer is far more likely to get 60% LTV loan (e.g. a lower loan amount) than the full 80% LTV loan (e.g. the higher loan amount).  Sounds logical.

But be careful.  The premise is sound, provided, that the buyer has sufficient post-closing liquidity.  Lending decisions are complex, and take into consideration the collateral value (appraisal), project approval (the building finances), the buyer’s debt-to-income ratios, and credit scores.  But even if all these factors are stellar, a buyer must also have sufficient post-closing liquidity to support the loan.  Typically 6-9 months of loan repayment, insurance and taxes.  A buyer with limited post-closing liquidity thus might qualify for a higher loan amount that does not deplete his cash reserve.  But the same buyer might fail to qualify for a lower loan amount that requires more cash into the deal, and thus leaves the buyer with lower post-closing reserves.

Inadvertently, you might be shooting your seller in the foot by restricting the buyer to a loan that they will not qualify for.  So before you suggest offering a lower loan amount, carefully consider whether the buyer has the post-closing liquidity to support it.  It might end up being a harder loan to get!