Finding Money for your Borrowers


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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  1. I think this is a smart move by portfolio lenders. There is a large untapped market out there due to the current tightening of the mortgage world. It is going to take these small lenders that are willing to take the risk to open that market back up. Sooner or later the big boys will slowly start loosening their grip.

  2. The loss of DPA is going to hurt the real estate industry for quite some time. Like you said, buyers don’t know how to save money.

    I am working with several buyers right now and all but a couple need some type of DPA. Now they are rushing to get a deal done before October 1st.

  3. Here in the UK its getting hard to find the money for some investment deals.

    Data compiled by Credit Suisse shows that there were 17,300 mortgage products on the market in June 2007. Today there are just 4,000.

    Last year, 100 financial institutions were vying for mortgage business. Now, almost all net new lending is provided by just five banks – Lloyds TSB, Abbey, HBOS, HSBC, Barclays and Royal Bank of Scotland.

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