Tag: Mortgage loan
As a real estate agent, how often have you put your buyer and a great property together at the right price, only to find out that they are having trouble qualifying for a mortgage? Well, here’s some information that may help.
The largest wholesale lender in the country has a product called “Pay Advantage” that will lend up to 95% LTV with no monthly mortgage insurance (commonly called M.I.). That’s a big deal, as a $190,000 FHA loan on a $200,000 purchase would require an extra $200+/mo for that M.I. – for the life of the loan! Not only would your buyer be paying an extra $2,500 a year, but they would not even qualify for an FHA loan, unless the property will be their primary residence. Second homes in Florida (or anywhere else) do not qualify for an FHA loan, but they do qualify for a Pay Advantage loan. Of course, that extra $200+/mo also adds some drag on the debt-to-income (DTI) ratio that cannot be exceeded for loan approval.
Now let’s consider the source of your buyer’s down payment for that 95% LTV. In most cases, all down payment and closing costs must be sourced from the borrower’s own funds. Believe me, the underwriters will pursue documentation that verifies those sources – bank accounts, investment accounts and the like. Underwriters will question the source of any major deposits made in the last 60 days and will require a “paper trail” that accounts for any such deposits.
Well, this same lender has a 100% Gift Program that permits the borrower to use a “gift” of funds for the entire down payment, as well as closing costs! That means parents or other friends and relatives can “gift” the money to cover those costs, allowing your buyer to get a mortgage with virtually no out-of-pocket cash. I’m really beginning to like this lender!
Now add in closing times of 23 days, on average, in order to meet or beat your contract dates.
When you put all these advantages together, that can mean more closed deals, higher commissions and faster closings! Want to know more? Just give me a call.
Innovative Mortgager, LLC
239-989-2288 mobile (anytime)
Unless you were on the space station, orbiting Earth, you already know that one week ago Ben Bernanke sparked a significant jump in mortgage interest rates with his Fed comments. In some cases, they increased by one half a point over night…that’s HUGE, as Billy Fucillo (our local mega-car dealer in SWFL) would say. Rates continue to climb and fall back, even on an intra-day basis.
Investing in Bank Notes is not for the faint of heart. But like any investment product, the higher the risk, the higher the higher the gain. Notes can be very lucrative for Investors wanting to be in the Real Estate Investing world without the problems that can come from actually owning property.
Purchasing a Note from a financial institution means you are not the mortgage holder of the property. The Bank will sell the Mortgage to an Investor at a discounted amount and now the Property Owner makes payments to you to fulfill their mortgage debt. Banks will usually sell the Note because the balloon payment is coming due and the Property Owner does not have the money to make the Balloon Payment. Many times, the Property Owner cannot re-finance the loan because for reasons brought on by the current economy. Banks may sell the Note for 60% of the face value to a Private Investor. (There is no typical figure, this is for demonstration purposes.)
There are several ways to profit from buying a Discounted Note –
Producing Note with New Balloon Due Date – The Property owner is current with payments. This strategy keeps the payments the same for the Owner but extends the Balloon payment due date for another 3 to 5 years. The example, you purchase a $600,000 mortgage for $450,000. Owner continues to make the current payment of $12,000 per month payment, same as they made to bank. At the end of 5 years, Owner owes the balance (Balloon) based on a $600,000 mortgage. If the Owner falls behind in payments or cannot make the Balloon, the Investor can foreclose in the property. The only change to the Property Owner is the extension of when balloon is due and a new company is collecting payments.
Producing Note with New Balloon Balance – Using the same example as above, the Property Owner is given the opportunity to continue making payments for 3 years but the Balloon payment is based on $525,000 saving the Owner $75,000 in principle as well as the related interest on the original balance amount. This strategy gives the Owner incentive to keep the business open to save money on the Note.
Non-Producing Notes – This strategy is for Investors interested in flipping or obtaining discounted properties for their own use. These properties are in foreclosure, many of them abandoned. The Bank may be willing to take a larger discount because of this being a distressed property. Several tears ago, I was part of a non-producing note sale and property flip. The note balance was $628,000 and the investor purchased it at $375,000. Putting the property on the market immediately after cleaning property, resulted in a sale for $485,000 in under 60 days which was still under market value. The Buyer was an end user.
If interested in learning more about note purchases or to become a member of my Member-Only Note list site, email me at InvestSWFL@gmail.com. Notes are listed on this site for 30 days before being released for public sale.
Broker/Owner, Investment Property Consultant
Real Estate Solutions of SWFL, LLC