The current state of financing – SIMPLIFIED, at least as of DEC 2014
What to gain from the following summary:
Lending is has become very basic with very few exotic mortgages (No stated income, no high LTV loans to investors, much more scrutinized underwriting)
- The 3 basic sources of mortgage loans and solutions:
- Bank (local) financing (Portfolio for long short term solutions, construction, Jumbo) Really the most flexible for financially and credit healthy borrowers
Our group believes this to be the future of lending (Portfolio loans) :
2. Private/ hard money (again, short term for rehab or quick acquisitions – commercial and residential) – credit and financials far less important, 80% of underwriting is about the asset (property – (see Texas Rehab Loans for more)2.
3. Long term financing/mortgages: (for purchase of currently occupied or move in condition properties. We use to refinance bank and private money loans). These your basic government insured and guaranteed: (Fannie Mae- Freddy Mac is main player for these conventional mortgages)
Typically high credit , verified income is required.
Some factors to consider and overcoming problems you may have faced:
Some problems you may have faced recently:
limit on number of properties (you have more than 10, more than 20) bank (local bank or hard money)
Factors that could be slowing home sales (whether a good thing or not, these factors have made owning a home an impossibility for many)
seller carried 2nds restricted or not allowed
tough underwriting for investors (not helping absorb foreclosed inventory)
reserve requirements for borrowers going up(lender stated you lacked proper reserves) –meaning you need more cash
self employed : very tough , as all income must be documented via tax return now (little or no documentation loans are history)
****many of these issues can be overcome with portfolio lending.
Tip for the day,
Prepare an organized gamelan for financing.
Updated Personal financial statement
Resume – (something showing what you do and real estate related projects)
Organized online folder of all financial documents(income and tax documents, 1099, w2, bank statements, property info- leases, photos, notes of work completed…)
The goal : present a compelling story for your loan with clear information for your broker-banker to review.
Present reasons you may be good bank “customer”, open accounts, deposits, perhaps brings your business transactions to the lender. Most of these portfolio lenders are depository banks
What Monty Busch (Urban Coyote funding and Texas Pride mortgage may be of assistance)
We are investment loan consultants and offer Quick analysis of the initial financing decision. We are guiding homeowners and investors alike in the available alternative financing methods: