With the credit crunch in full swing, investors should start to pay attention the the lending options available to their buyers. 
 Most investors and individuals in the real estate profession already know that it has become difficult to finance properties and with daily changing guidelines it is very hard to predict the future, but lets look into the 2009 crystal ball and see what is coming.

With FHA seller down payment assistance disappearing on Oct. 1 many builders, investors and sellers are faced with fewer clients to buy their home.   This is only big news because a majority of Americans do not like to save and would rather spend.   Now the next generation of home buyers are not prepared to buy a home with a down payment.  While this is not a bad thing long term it certainly is not good for sellers come October.

Suprisingly there are a number of loans that still offer low down payment solutions.

While FHA is the grand daddy starting in 1934 and lending to 34 million homeowners. Since the 70’s the USDA Rural Home Loan Program has been an alternative solution for those that buying and selling homes in the outer lying areas of metro cities.  This program is still funding loans to 100% and if the property and borrower is eligible it is a better program than the old FHA program when comparing interest rate, final payment and closing cost.

Another solution is Portfolio lenders.  This is not the first time I have spoke about these banks.  While nearly impossible to locate by the average person or mortgage broker, these banks go by their own set of rules.  I still see 98% programs that allow the 2% down payment to be gifted by employer or family member.   

The come back kid.  Over the last year and a half the combo loans have became nearly extinct and are now seeing some signs of life.  This could be a major indicator that we are truly at the bottom of the housing cycle.   Combo loans usually have a first mortgage at 80% and then 5-15% in  second loan.  While these loans can not currently go to 100%, having them as a option the avoid the Private Mortgage Insurance companies is a good thing.  Mortgage insurance companies have tighter guidelines than most banks and generally require a mid credit score of 680 to finance above 90%.

While the crystal ball can change its out look tomorrow one thing is for certain.  This is the United States of America, it is a country of individuals that can over come adversity.  Its made up of smart business entrepreneurs that know how to not only be creative, but are willing to except risk.  If you know where to look there are always financing options for your buyers.

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Tags: lenders, loan, mortgage, mortgage insurance, portfolio lenders, real-estate-finance

Last week I spoke about why Portfolio Lenders are important to investors, but the bigger question may be how to find them.   

Tracking down a financing source is never an easy task.  Many individuals have no idea where to start so they usually talk to there personal bank first.  While the likes of Wells Fargo, Chase, Bank of America and more are large institution’s and have mortgage services, they generally are not competitive or creative when it comes to investment properties.

So how do you find a local or regional portfolio lender/bank?  

The yellow pages cant help you.  If you called every local bank the employees might not even know the meaning of portfolio lending and you could spend a better part of your day trying to get help.  For those in need of help there are a couple of solutions.

The first one is networking.  If you want to become an investor you must join them.  Find local clubs and associations that support and host networking events for investors.  These events will give you a chance to find out how others are finding outside the box financing solutions.

The second one is your sales team.  If your sales team consists of a Realtor, ask for a referral.   If you are working with a wholesaler, they could have a name, number or source for your needs.

An other good option is a mortgage broker.  Then whole concept for a mortgage broker is to seek out financing options.  There are many mortgage broker that are tremendously successful, not because they have the lowest rates and fees, but because they understand how to carve out a niche and network between several banks, sometimes 100’s of them, to find the financing solution that an investor may need.

A recap:  To find the next best Portfolio Lender you need to network.  Talk to Realtors, wholesalers, mortgage brokers and even other investors. 

Tags: banks, lenders, lending, loans, mortgage, portfolio lenders, real estate, real estate investing, real-estate-finance

Mortgage loans can be come from a variety of sources, private individuals, banks, mortgage brokers, mortgage bankers, credit unions, etc.

Investors need to understand that in most cases these lending sources are not actually making their own capital available for a mortgage. Instead, they are acquiring or borrowing the funds from another party. Pension fund, hedge fund or insurance company can and do provide liquidity to banks, credit unions and lenders.

Portfolio lenders have the ability to lend from their own funds. This means that they are able to make loans available at any terms acceptable to them. In many cases, this means that a portfolio lender will have funds available with less restrictive qualifications than a conventional lender.

Why is this important to an investor?
In today’s market place conventional financing can be difficult for investment properties.

Below or the top 5 reasons to find a portfolio lender:

1. Can lend to individuals that own more that 10 properties
2. Can self insure their loans which allows them to finance 90% of purchase price
3. They utilize compensative factors to over come deficiencies
4. Allow deposits into their bank to help qualify
5. Can cross collateralize other properties

There are a number of benefits to using a portfolio lender or bank, but be prepared to have a higher interest rate, high closing cost or both to utilize this out side the box lending source.

Tags: Interest Rates, lenders, lending, loan, mortgage, portfolio lenders