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All Forum Posts by: Scott VanHee

Scott VanHee has started 0 posts and replied 22 times.

@Jeff L.

If you elect to obtain additional insurance, like the umbrella you mentioned, no, this is done outside of the mortgage company.  You will pay the insurer directly.

Your mortgage payment is PITI... Principal, Interest, Taxes, and Insurance. The mortgage company will collect the TI (taxes and insurance) from you on a monthly basis, and then pay those bills when due, to ensure that the bills get paid and their lien position doesn't get primed or the house burn down without coverage. Nor does the mortgage company want to gamble on whether or not the borrower will have sufficient funds to pay when do. As @Jon Holdman said, be prepared for annual changes in the escrow amount due to increases in taxes and/or insurance.

Having said that, it's not uncommon for mortgage companies to give you the option of escrowing the TI once your LTV gets low enough.

Post: Auction.com???

Scott VanHeePosted
  • Denver, NC
  • Posts 22
  • Votes 7

@James Miller

Based on your comments, I presume Auction.com accepted a copy of your check made out to the local title company?  Great comment and advice!

@Tim Ryan

Good advice and much appreciated!  A bidder just needs to keep the emotion out of it and try their best to gauge whether there's truly another bidder out there or just Auction.com counter bidding and they're bidding against themselves (each auction I've looked at, they have a bolded disclaimer that they can counter bid on behalf of the seller, until the reserve is met).

@Jennifer Day

I think your only option is to try and get it rezoned residential.

Was it zoned residential when you bought it and then subsequently changed?  I presume so, since you mention wanting to refinance, or was the current lender asleep when it extended the existing 1st mortgage?

@Michael Lynch

I don't know of any 'large' bank that would accept a 3rd position. I suspect that you'll have better luck with a local bank or private money, though it likely will still be challenging. The overall LTV (including all 3 mortgages) will be key and your selling point will need to be that the 2nd mortgage ($8k) will burn off in 2.5 years (based on your surprise that it was even out there, I'd recommend that you follow up in 2.5 years and ensure that it's been satisified, so that it doesn't surprise you again in the future).

Does the $8k grant vest over the 5 years?  If so, do you have any paperwork that supports the vesting to be able to show a potential lender?  If it does vest, then the 2nd isn't currently $8k and the paperwork could further help your case.

Other option is to completely ignore the equity in your residence and look for creative financing on the property you want to purchase.  Maybe seller holds a 2nd, maybe partner with someone, maybe get some F&F (friends and family) money, maybe offer a higher rate for the 2.5 years the 2nd is outstanding.  Best of luck!

@Daniel Kwon

Sounds like you don't have much of a credit history and the bank is looking for one to gauge how you'll perform on a loan it extends.  I don't think there's a way to 'get around' the credit score - other than potentially putting substantially more down.  With regards to your question about local banks and credit unions... the only way to find out is to invest the time and call around.  Hopefully, there's a BP poster who knows your area and can point you in the right direction.  Best of luck with the deal!

@Jahan Habib Actually, it's riskier for the lender if the borrower has $0 or nearly $0 vs. 20% into the deal, as it becomes a lot easier for someone to walk away from something when they don't have any 'skin' in the game.  Also, keep in mind that the lender is looking at a debt return, not an equity return.

The lender is going to play the odds and allocate its capital to someone with 'skin' in the game, who will have a vested incentive to have a successful project, and hopefully has previous, successful experience - as @Neil Aggarwal notes in his reply.

Best of luck finding the $0 down financing and you're spot on that you won't know absolutely unless you inquire.  Assuredly, you'll never get a 'yes' response, if you don't ask.  Just be prepared for an uphill challenge.

@Jeremiah Perry The HML and private lenders can be great sources when you have a property that's not seasoned or stabilized (they're good for other sources as well). Your traditional lender will likely have at least a DSCR covenant on your income producing project. If the project violates that min DSCR, then you're somewhat at the mercy of the traditional lender.. will it declare a default and charge you the default rate until the DSCR is back in compliance or will it charge you some fee to waive the violation for that year or will it charge you a fee and increase your rate until back in compliance or will it go all the way to accelerate the loan and foreclosure.

Traditional lenders will tell you that they're cash flow lenders, not collateral lenders. Thus, if the project cash flow isn't generating the required min DSCR they can get nervous and they want you to pay for their nervousness. Obviously, all of the above possibilities are very dependent on the situation. If the requirement is 1.25x and the project hits 1.24x, the traditional lender's response/action is likely to be different than if the project hits only 0.8x!

@Josh Lee As you compare the typical variables (rate, fees, term, etc.) I would caution you to know the fine print, specifically, is the lender extending you a commitment or not. In 2009, I was working with someone who came in one day and said that his large, national bank sent him a letter notifying him that his HELOC had been cancelled. Notice that the letter said it had already been cancelled - it didn't advise him it was being cancelled in X days. He didn't have anything funded on it and when the crap hit the fan, that large, national bank (along with many others) had balance sheet issues. One way some of the banks fixed their balance sheet was to cancel uncommitted facilities that were unfunded.

A lot of people who were looking simply for 'cheap' money, got the cheap money, but never fully understood that the lender actually made no commitment to lend. Typically a commitment costs a little more vs. an uncommitted facility. So, when you're comparing Lender A vs. Lender B, don't only look at the rate and fees... look to see why there's a difference. Whether it's b/c 1 has a longer I/O period or a longer amortization period or higher LTV or.... 1 is a commitment and the other isn't.

@Sarah Miller Yes, you can use the equity from property A for the down payment on property B.  The challenge is finding a lender.  Without any variables, here's essentially what you're looking at... (1) getting the existing 1st mortgage holder to increase its mortgage to provide you the cash out or (2) finding a lender who's willing to hold a 2nd mortgage on property A or (3) finding a lender who will provide you with $X and secure it with a mortgage on both properties A and B.

Completely different option that doesn't involve property A would be to try getting seller financing on property B.  The seller note could be shorter term, tied to your planned refi on property A when it's seasoned.

@Brian Alterman 

Regarding liens - most counties now have their info online and you should be able to search the county's records (ROD - register of deeds) to see if there are any other filings against the property.  As another poster mentioned, this isn't a substitute for title insurance, but does allow for a quick look as to the reasonableness of a verbal comment.

With an unrecorded, but executed mortgage you're essentially in the same position as an unsecured lender at origination; however, have the ability to record the mortgage at some future point to become a secured lender (ignoring BK look back rules).  Your risk is that at the time of recording you have no assurance that the position you thought you'd be in at execution is the same, as someone else since then could have filed.  It's not a concept used very often, but is an option.  You're correct... if everything goes fine and the borrower repays you, the unrecorded mortgage won't ever show up to cloud the title as you never perfected your lien (and the borrower should require that the lender return the executed unrecorded mortgage upon full pay off to protect himself/herself).

With regards to the PG, many individuals sign them daily when dealing with a traditional lender, as traditional lenders aren't collateral lenders. There are non-recourse deals done, but those are usually done through the life companies and on Class A properties with strong tenants on long term leases. Anyway, individuals don't set up LLC solely in an effort to protect them from lenders, but other liabilities.

Your #8 - correct, you holding a 2nd mortgage doesn't guaranty you anything.  If something goes wrong with the project and the 1st mortgagor takes action, they have no responsibility to you or your 2nd mortgage.  There are many different scenarios that could be played out here.

With regards to your comments about 1st vs. 2nd and 'big money' vs. 'small money', there's absolutely no correlation between the lien position and the $ amount.  Yes, the preponderance of 1st mortgages are the larger, but there's no legal requirement for it.  Typically the 1st is larger as it's the purchase money. 

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