Facts, Fiction, and the Fantasy of Real Estate

1. What is the most you will lend on a non-owner occupied property? What is the minimum amount?

Lending restrictions based on property type (owner occupied, second home, or non owner occupied) depend on the lending institution. Although once you begin looking at the extremes 30,000 or 2,000,000 you begin to pay for it with the rate, meaning, there are hits increasing the rate due to the irregualrity of the loan amount requested. If your credit and income support the loan there is no real limit to the size of the loan amount.

2. What is the most percentage-wise you will lend on owner occupied loans?  What is the most for investor loans? We are talking percentage or LTV.

Again this is based on the lender you choose (another reason I recommend using a broker) For owner occupied loans, there are lenders that will go up to 125% of the value of the home. For investment, non owner occupied properties 100%… again if your financial situation supports the financing arrangment.

3. Is that amount (the amount you are willing to lend) based on appraised value or purchase price?

It is always based off the lower figure. If your home appraises for more than the contract price, 100% financing is based on the contract price, if the appraisal comes in lower than the contract price, 100% financing is based off the appraisal. The only way around this is 125% financing.

Suppose I get an even better deal on this house that appraises for $100,000.  Instead of paying $80,000, my purchase price is $70,000.  Would you lend me $100,000.

Not unless you were willing to take out a loan that was structured as 125% financing (or whatever the percentage works out to 125% being the maximum LTV allowed. Of course if you did take out this loan and new your home was worth an additional 20-40K then despite the loan structure, you would be able to refinance into 100% financing as soon as seasoning requirements have passed, or if you have a lender that does not have seasoning requirements, which I do.

4. Do you lend on the after repair value?

There are specific loans designed to accomplish this, although you will be required to bring in a down payment for the original purchase, between 5% and 15% depending on the purchase price.

5. Do you allow the seller to take back a note

Yes.

So if the seller were willing to take back a 2nd mortgage of 20%, you would give me an 80% 1st mortgage?

Ultimately this is up to the lending institution, a good broker has probably done his research and will know the answer based on your situation and the lender that he or she plans on using, as a general rule of thumb this can be accomplished without any real magic. 

6. Do you do piggybacks?

Yes, piggyback is an industry term for the 2nd loan closed concurrently with the 1st. Piggybacks are very common, and easier to obtain than stand alone 2nds…that is to say more lenders offer piggyback 2nds than stand alone 2nds. But both are obtainable.

7.  Do you have any creative financing, private investors, or hard money?

Yes. Any good broker will have a number of hard money and private investors ready.

8. Do you have any equity lenders?

Yes. ie: Home Equity Lines of Credit (HELOC)

9. Do you offer any loans for fixing up the property?

Yes. ie: construstion loans, and construction to permanent.

10. Do you have non-conforming loans?(Stated income loans, No ratio loans, No income or asset verification, No Docs)

These income verifying tactics have become an industry standard, but borrowers should understand the less verifiable information you give to the lender the more risk they assume, and you will pay for it with the interest rate charged… I recommend trying to document everything possible, it is well worth the extra work, and can save you literally thousands.

11. Is the loan based on the property itself or do you look at my income?

Loans are provided to qualified borrowers which is based off employment, income, and credit history. There are a number of ways this is done, but these are the most importnant components. The property is merely the collateral you are providing the lender. It is their security that you will pay back the loan, because if you don’t they have the right to sell it accordingly to the loan arrangments.

12. Up to how many units do you lend?

Once you are lending on property that is zoned commercial or has more than four units, typically you are looking at a commercial loan, which is a different beast. Brokers if experienced and established with the right lenders can make commercial loans. We can do commercial loans, but the qualifying process is different.

13. What is the interest rate?

The interest rate depends on program security, credit,  and doc type (full doc, stated income, etc…) Ultimately it will dictate your mortgage payment when taken in consideration with your loan amount, and can be thought of as the interest the bank is making off you… a simple calculation is loan amount (200,000) times interest (.06) equals interest paid over the course of a year (12,000).

14. Wjat kind of fees do you charge?

Fees are always negotiable, and depend on the type of financing the borrower needs.

15. Do you allow the seller to pay the closing costs?  How much closing costs typically run?

The seller can pay closing costs if it is included in the purchase contract. A common practice is what is known as seller credit. Closing costs depend entirely on the size of the loan amount.

16. Do you allow some type of seller concession, such as a repair or decorating allowance?

The contract is what should address these things, however you should know it is illegal for a buyer to receive cash at closing on a loan that is not structured  to do so. So you must be careful when considering these things. 

17. How long does it usually take to get an approval?  How quickly can you close?

An approval can be accomlished in as little as an hour, but the amount of time it takes to close depends on the working relationship between borrower and lender. If the borrower provides the necessary paperwork in a timely fashion, and the broker expedites his responsibilities, you can close in two weeks.

18. What would you like to see in a loan package?

That it is structured to accomplish my overall financial goals, not just put me into anther home. If the loan has a purpose, and an objective, and it coincides with my overall goals, I am happy.

19. If the seller were to put me on the deed, could I get a refinance loan instead of a purchase loan?  Is there any “seasoning?”

No, you would need to prove that you have been paying the current mortgage with cancelled checks, or something of the sort. If you had been paying their mortgage for 12 months, and can prove it, than there is a chance you could get a refinance loan rather than a purchase loan, but there is really no advantage to doing this, in fact if you use a quit claim deed to transfer you onto title and them off title they have granted you no warranties and will be taking on unnecessary liability.