Archive for October, 2009

Real Estate Investor Rehab Loans

Friday, October 30th, 2009 at 8:24 PM

Real Estate Investor Purchase Rehab Loans.

There are great opportunities for real estate investors in the market today. This is the best market for real estate investors in our lifetime. Unfortunately financing is not available as it has been in the past. There are options for financing purchase and rehab projects for real estate investors. Whether you are investing in commercial multifamily housing or residential investment properties there are lenders to finance purchase or refinance investor rehab projects. Since there is no secondary market for these types of projects your deals will fall into one of two categories. Your deal will either be non conforming investor rehab funding or hard money rehab funding.

Non Conforming Real Estate Investor Rehab Loan.

There is no such thing as conforming investor rehab loans. Conforming means there is a secondary market that will purchase these loans on wall street. The secondary market would the have established guidelines that all projects would have to conform to. Since this market does not exist the first category of loans are considered non conforming. Any non conforming investor rehab loan funded in this must meet similar guidelines to conforming mortgages. Whether commercial or residential these loans would meet the guidelines as all other loans except they require major rehab and are investment properties. This means the borrower, real estate investor, would need good credit, verifiable income, an ability to repay the loan, acceptable down payment and reserves, and higher licensed bonded contractors to do the rehab. The advantage to the non conforming real estate investor rehab loans versus the hard money loans is that the rate and fees are substantially lower. The dis advantage is that there are many more qualification criteria and it takes longer to get the financing. But if you qualify and have the time it may be to your advantage to get a non conforming rehab loan versus a hard money real estate investor loan.

Hard Money Loans.

Though the rates are much higher and the fees will be from 4% to 10% hard money loans could actually be more profitable to real estate investors than non conforming investor rehab loans. First of all these loans generally fund in 2 to 3 weeks. Secondly, the qualifications are much less and therefore you can do more loans. Truly you may qualify for a hard money loan when you will not for a non conforming loan. As such you have no option.

Qualifications of Non Conforming and Hard Money Investor Loans.

Both programs require you to purchase property where the after rehab value is 65% or less. Both programs require you to have an acceptable exit strategy. Non Conforming rehab financing programs will always require a down payment of at least 20% of the total purchase and rehab costs. Hard money loan programs may or may not require the down payment. Both programs will make sure the contractor or investor has the experience and sometimes licensing to complete the project. So if you have the experience, property, exit strategy and assets you can make lots of money by purchasing and rehabbing investment property.

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A Mortgage Banker for 20 years I have been able establish relationships with private investors who make hard money loans for residential and commercial projects. If you require financing for your real estate investment deals, whether commercial or residential contact me at 708-299-3244 http://hardmoney.alldominionmortgage.com
You can also email me a louisj@alldominionmortgage.com

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New Mortgage Proposals: More Common Sense Required, Not More Regulation!

Wednesday, October 28th, 2009 at 7:58 PM

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The news that the Financial Services Authority has issued its plans to repair the barn doors of the mortgage industry has received a mixed response.

Leaving aside obvious jibes about more points scoring than credit scoring, there is at least a return to a common sense approach to mortgage lending.

The headlines have centred on the abolition of so called self certification loans. “Toxic Combination” loans will be also banned in the proposals i.e. those loans with a high loan to value for somebody with a poor credit history.

True, these loans were oversold in the heady days of 2006-2007, but this is an easy shot at a predictable target.

Let us not forget that a major contribution to the debacle of the last 2 years was the seeming ease that original loans could be bundled up by financial institutions into securitised packages. These loans were further rebundled and so on, in a scheme which was part Pyramid selling and part Emperor’s clothes. An initial loan of £100,000 taken out by a home buyer could easily multiply into a final loan of 5 times as much.

It is a relief that Lenders will not be restricted to artificially set cap on loans to value or loans to income.

What comes through loud and clear is that the Lenders will be held ultimately responsible for assessing a borrower’s ability to repay the loan, taking in all the circumstances.

The Banks and Building Society cost cutting measures have proved to be a false economy.

A Radical Solution

We do not need to delve too far into the past to seek clues for a better proposition.

Before the major Lenders fell prey to shareholder pressure to cut costs (come in credit scoring, you’re moment has arrived), decisions were made by Bank Managers and Building Society Managers.

By and large, this was done by personal knowledge, with “customer facing” interviews (although we didn’t know it at the time) and based on the skill and expertise of the Manager as to whether or not a person was worthy of a mortgage.

Is it Happening Already?

Well possibly. The fact that the FSA has not gone further with its proposed regulation, may lead to such a conclusion.

The FSA may already have seen a more prudent lending regime over the last year or so.

Research by the Daily Telegraph, released this week states that half of all home buyers are having their mortgage requests rejected This in a mortgage market where the number of approved mortgages is rising each month. The Banks and Building Societies are clearly pursuing a strategy of fighting only for the best : a flight to quality applicants.

Conclusion:

So there you have it. Not more blunt instrument legislation, but empowered human beings with experience. Radical eh?

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The news that the Financial Services Authority has issued its plans to repair the barn doors of the mortgage industry has received a mixed response.

http://www.cluttoncox.co.uk

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