Mortgage and Portfolio Loan Guide

Tax Returns and Mortgage Approval

What impact do your tax returns have on buying a house?

It is no secret that the income piece of the mortgage approval process is a major factor. Your ability to repay the mortgage is arguably to MOST important factor that is considered when applying for a home loan.

But how is that income calculated?

What if you are self-employed?

What if you have multiple sources of income?

In this post I am going to cover some of the most important things to consider when it comes to buying a house, and how your income plays such a major role.

How is my income calculated on my mortgage application?

There are many different forms of income, I am going to cover the most common that I run into, and give you general basics on how that income is considered in connection with mortgage appproval.

No matter the scenario, an underwriter is going to want to see consistency, and stability. Proving your ability to repay is the name of the game. If you can demonstrate consistency over most recent 24 months, and stability (same line of work), you are on the right track.

Salary employee (W-2)tax returns mortgage approval

Your annual gross salary divided by 12.

Example: 120,000 annual salary / 12 = 10,000 monthly income

For salaried employees it’s pretty straight forward as long as you have been in the same industry for 2 years. If you used to be an electrical engineer at 100K/year, but now you teach physical education at the elementary school, the underwriter may ask questions regarding stability, and may need to you to be on the job for 6-12 months before reconsidering.

It has to make sense.

Hourly Employee

Base wage is calculated by average number of hours reflected on most recent 30 days pay stubs.

Example: $15/hour X 40 hours per week X 52 / 12 = 2,600/month

If number of hours fluctuate, you’ll need a written verification of income ordered by your lender to be filled out by your boss or human resources department in order to get a better feel for your average number of hours worked

Commission – Bonus – Incentive – Overtime Income

Any fluctuating income is going to require a 24 month history in order to calculate consistency. If the incentive income is declining the underwriter will likely only use the most recent 12 months or year to date amount for the commission/bonus/overtime income in order to be safe.

1099 – Private Contractor Income

When you are a 1099 employee, the company paying you does not deduct things like federal/state income tax from your gross income. For that reason, what you claim on your federal tax returns as your actual income is up in the air until you actually file your tax returns.

There may be deductions that you’re eligible for that will reduce the amount of income you claim on your tax returns.

That reduction in earnings claimed will have an impact on your debt to income ratio when applying for a mortgage.

There is almost always a lack of consistency when considering 1099 income because of the nature of those types of earnings.

Again, in this case the underwriter is going to want to see proof of 24 months of receiving that type of income in order to determine what you actually claim as income after tax write-offs.

Self-Employed Income – Business Owners

Self-employed income is evaluated similar to the way 1099 employee income is reviewed.bank statement loan program

Always best to be able to show two full years of tax returns so that the underwriter can reasonably calculate your income, and get a feel for the health of the business.

For simplicity purposes: your income is the number that is shown on the Adjusted Gross Income line on page 1 of the 1040’s.

Yes there are some deductions that can be added back into the bottom line, but for starters – just find the adjusted gross income to understand basic ballpark.

In addition it is common to have to require a year to date profit and loss statement. This is used to evaluate how the company is doing in comparison to the previous year. It is NOT used to increase your income if you happen to be having a very strong year.

If your business is anything OTHER than LLC or sole proprietorship, you’ll also need to provide two years of business/corporate tax returns along with K-1 if applicable.

Multiple Sources of Income

When seeking approval with 2 jobs, you need to be on job jobs for two full years. Otherwise there is no way to determine the likelihood of you being able to maintain that type of demanding work load.

If the second source of income is NOT from an employer, requirements will vary depending on source of income (disability, social security, pension, rental income, etc.).

Keep in mind – the name of the game is the ability to prove consistency and stability.

What if I filed an extension on my tax returns?

Many business owners take advantage of the opportunity to NOT file their taxes in April like the rest of the country, and instead file an “extension”. The extension allows them to not officially file their taxes until October.

This presents challenges when applying for a mortgage for 2 major reasons:

  1. The income for the year that the extension is filed for is basically disregarded by the underwriter. They will only consider it to confirm the income is in line with previous years. Cannot use it to increase the averages.
  2. When the extension is filed, there is an estimated amount owed for that year’s taxes. When an underwriter sees that estimated amount owed on the extension, they will typically require that amount to be paid prior to closing.

This goes for personal and business tax returns alike.

What if I show low income on my tax returns and I am a business owner?

It is very common for business owners to take full advantage of the legal tax write-offs that are available to them.

The problem with using those write-offs is they often offset the bottom line income claimed significantly.

For business owners in this scenario, who actually have strong income that they can prove – a bank statement loan may be the best solution.

A bank statement loan is a type of portfolio loan that allows business owners to qualify based on the income shown on their bank statements over a 12-24 month period.

This gives the lender the opportunity to evaluate a self-employed borrower’s income with more of a common sense approach.

On a bank statement loan you must be self-employed with the same business for at least two years.

[more on Bank Statement Loans and Portfolio Loans here]

What if I have been self-employed for less than two years?

If you have have been self-employed less than 2 years you may need to look into getting a portfolio loan.

It’s an underwriter call, but without having 2 full years tax returns as self-employed most underwriters find it difficult to agree that stability has been established.

With a portfolio loan you may be able to get around that requirement if:

  • You have been self-employed for at least 1 full year on tax returns
  • You have at least two years of documented previous successful employment in the line of work in which you are self-employed in, or in a related occupation or
  • You have one year of employment and formal education or training in the same line of work

If you’re in business less than one year, that income is not going to be considered as effective.

What if I want to only use my most recent year tax return to qualify?

When having a strong rebounding year after a slow year, it is often asked if a business owner can ONLY use the most recent year tax return to qualify. The logic is to be able to exclude the need to average the low year with the most recent strong year.

There is a conventional product that will allow you to use only the most recent year’s tax returns to qualify.

To be eligible for this product, you must have been in business for at least 5 years, and meet all other credit and asset guidelines. Contact me for questions on this.

In Summary

Tax returns play an extremely important role in the home buying process.

When you file, how you file, and how much income you claim will determine what type of loan will suit you best.

Get your questions answered.

 

I encourage you to reach out.

We can’t help everyone, but we do make every effort to take a common sense approach to get our borrowers approved if it makes sense.

 

 

 

self employed home loans

Jumbo Loan After Foreclosure

How to Get a Jumbo Loan After Foreclosure

Getting a jumbo loan (or any mortgage for that matter) after foreclosure requires a close and careful evaluation depending on how much you can put down. Whether you’re getting a jumbo loan, traditional mortgage, or a portfolio loan; there are some things that you can do to prepare yourself to buy a home again.

We’ll look at some specific requirements below and hopefully give you the confidence you need to prepare yourself to buy again after having a foreclosure.

Buying a house with bad credit or damaged credit can be challenging, but it shouldn’t be impossible.

When you know what you’re up against, the task of getting ready and getting approved becomes much more attainable.jumbo loan after foreclosure

With so many folks regaining stability after the great recession, many find themselves to be in a housing circumstance where they are ready to upgrade to a better position, but don’t quite meet traditional lending guidelines. Whether it’s getting a larger home, or moving to a more favorable neighborhood many are ready to start a new chapter.

The light at the end of the tunnel is within reach for more people now than in the most recent number of years.

The problem that arises is the required waiting period after foreclosure or any major credit event like bankruptcy or short sale.

Traditional guidelines on a jumbo loan say you need to wait 7 years after foreclosure, but not if you’re getting a portfolio loan.

What is a portfolio loan?

Portfolio loans are non-traditional mortgage loans that are designed to meet the home financing goals of a borrower with unique circumstances. They are done by small banks, lenders, and credit unions. And these types of loans do not go by Fannie Mae, Freddie Mac, or FHA guidelines.

Whether it’s damaged credit, unique income, or property issues; portfolio loans are designed to be a solution for the tough scenarios.

The main factor when lenders evaluate potential portfolio loan candidates are: equity, reserves, and ability to repay.

More on Portfolio Loans here

What is the waiting period after foreclosure on a Jumbo Loan?

Typically what you’re going to find when seeking a jumbo loan after foreclosure is that 7 years is the waiting period with most lenders, but not with portfolio loans.

With a portfolio loan there are options where no waiting period after foreclosure or short sale is required.buying a house with bad credit

How do you suppose that is possible?

Obviously there are going to be strict guidelines if you’re looking to get around a major hurdle like a recent foreclosure. And the interest rates and costs are going to be higher than standard loans. These loans are considered higher risk. For that reason the lender has to mitigate that risk through pricing adjustments.

If you’re looking to get approved for a jumbo loan, and you’ve had a recent foreclosure, here are some basic things you should keep in mind…

No waiting period after foreclosure or short sale:

  • Minimum credit score is 580
  • 20% down payment
  • Must have 3 tradelines reporting on credit report for at least 12 months
  • Max loan amount is $1MM
  • 6 months reserves minimum (9 months for loans >750,000)

For better rates, and 2 years after foreclosure or short sale:

  • Minimum credit score is 620
  • 25% down payment (or as low as 10% down if credit score is 680+)
  • Must have 3 tradelines reporting on credit report for at least 12 months
  • Max loan amount is $1.25MM
  • 6 months reserves

For even better rates, and 3 years after foreclosure or short sale (ideal scenario):

  • Minimum credit score is 680
  • 30% down payment
  • Must have 3 tradelines reporting on credit report for at least 12 months
  • Lax loan amount is $1.25MM
  • 9 months reserves

Not all products are available in all states, and guidelines can change. But I at least wanted to communicate what can typically be expected. Reach out to me for your specific questions and scenario.

Although 30 year fixed options are available, it typically makes more sense to do these on a 5 year or 7 year ARM because of the rate difference. The goal is to refinance into something more suitable when the waiting period from foreclosure meets traditional guidelines.

Keep in mind, for primary residence, in many cases there are no pre-payment penalties on these loans.

Portfolio loans like these are a temporary fix for temporary circumstances. In most cases, it still makes more sense than renting because you’re building equity in the home you want, in the area you desire.

Portfolio loans are also available for business owners, and investors.

How long does it take to close?

Typically these loans take longer to close than the typical mortgage because of the risk involved and the special attention required.mortgage after short sale

The first step is to get pre-approved.

Although some close within 45 days, some can take 60 days.

The most important thing you can do to reduce the amount of time it takes to close your loan is to provide everything that is requested as soon as you can. Typically, if the communication is sound, and what is requested is provided, the process is much more smooth.

For portfolio loans especially, having a thought out letter of explanation can go a long way. The reason I stress that is because these loans are treated with more common sense logic than most loans you’ll find. The lender truly tries to find a way to say “yes”. But if the story doesn’t make sense, and the explanation is shaky, things could become more difficult than they need to be.

Trying to get by with the bare-minimum documentation often results in frustration and delays.

Be honest, and be transparent. Don’t wait for the lender to find an issue that you know exists. Be open about it so that a solution can be discussed.

portfolio mortgage lendersIf you have had a recent bankruptcy, foreclosure, or short-sale and you’re back on your feet, I invite you to reach out to me. I can’t help in every scenario, but many times I am able to make it work even if other lenders have said the loan cannot be done.

When you reach out, you won’t be connected with an assistant or someone overseas, you’ll be connected with me directly. About me

I hope you found this to be helpful, and I look forward to helping you accomplish your home ownership goals.

real estate investment loans

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

What is a Blanket Loan?

A blanket loan gives the opportunity for a growing real estate investor to bulk finance their portfolio. These investment property loans can be done on the purchase of new rentals, and refinance of existing property.

Great, but why would an investor want to have all or some of their rental properties wrapped up into one mortgage?

What is the advantage of a blanket loan?

In case you have been living under a rock since the crash in 2007, I’ll fill you in a bit on what’s it’s like to finance a rental property the old fashion way. (Don’t get me wrong, I love what I do, but the government regulation involved can be a bit daunting sometimes.)

When looking at getting investment property loans in the mainstream mortgage market, here are some challenges that are often faced:

  • Personal income issues
  • Personal credit issues
  • Number of financed properties
  • Property type restrictions
  • Property condition issues
  • The list goes on

What it boils down to is that the mortgage world is extremely regulated. From having to re-disclose a loan package within a certain number of days every time a loan officer sneezes, to having to get a letter of explanation for nearly every life event in the most previous two years. Okay, that might be a bit of an exaggeration. But the point is, getting a regular mortgage is not as simple as it once was.

So imagine getting 5, 10, 15 loans individually within a 3-6 month period. That means your entire portfolio is re-reviewed each time, possibly by a different underwriter.

Yeah, no thanks.

For bulk scenarios like this, a blanket loan is probably the best option in terms of sanity and simplicity.

Sanity; because it’s all done in one approval process.

Simplicity; because the approval is based on property cash flow and equity, NOT personal income and credit (although good credit is always helpful when being considered).

This is a commercial loan, so the property performance is evaluated more heavily than the investor’s personal situation.investment property loans

Typical requirements on a blanket loan.

  • At least 5 properties included in the loan.
  • Minimum loan amount is usually 300K.
  • Rental income must cover payment as well as other expenses like taxes, insurance, association dues, etc. Up to 20% vacancy factor may be applied.
  • Units must be 90% occupied.
  • No vacation rentals. Minimum leases need to be at least 6 months in length.
  • Close in an LLC.
  • Must have at least 2 years property management experience.

Of course, there are more guidelines in order to qualify. Every deal is evaluated individually, this is meant to give a brief snapshot of what to expect.

Typical structure of a blanket mortgage.

  • Maximum 75% loan-to-value.
  • Can be done on purchase, rate and term refinance, and cash-out refinance.
  • Typically done on 5 or 10 year balloon (amortized over 30 years).
  • 30 year fixed available in some cases.

How to apply for a blanket loan?

You can start by filling out this rent roll. By completing it in full you’re really able to provide a full picture for the potential deal to be evaluated and priced out. Depending on the complexity of the scenario it can take 48 hours to a week to get a response on if it can be done and what the terms might look like.

At that point, you can review the blanket structure and decide if this type of loan meets your needs.

What are some alternatives to bulk financing?

Full doc loan

This is where your income/credit/assets are evaluated in full. This can be done on a case-by-case basis up to 10 properties financed (down payment and pricing varies after 4 properties are financed).

The concern with going this route is that the properties you are potentially buying or refinancing might recently bought/renovated/flipped. When dealing with flips, it can be tricky to get an acceptable value (example: it was bought 3 months ago for 20K, renovated, and now is being sold for 110K). That’s an extreme example, but the point is that it can be a challenge to have acceptable value on collateral if the price isn’t justified in detail. Yes, that can be a challenge in any scenario, but when you’re doing a full doc loan it can be even more of a hurdle.

When looking at these opportunities, be sure to get info on when the properties were purchased. If they were originally purchased at heavy discount within the last 12 months then it would be good to know exactly what renovations were made so that value can be justified.

Individual Investor Cash Flow Loan

These loans are designed to cater to investors who would prefer a more simplified approach when it comes to approval.

Credit is pulled, we do verify assets, but we do not get docs on your personal income (no tax returns, no paystubs, etc). The deal is evaluated on the cash flow of the property and equity. We can go up to 80% LTV on these (on a 15 year fixed), or up to 75% LTV (on a 7/1 ARM or 5/1 ARM). The 15 year fixed is a nice option, but it can have an impact on the cash flow, so it doesn’t always work out when structuring it on a 15 year.With this type of loan there is no max number of financed properties.

For cash flow we take into consideration the current lease on the property (if applicable), and we get a 1007 rent schedule completed by the appraiser to tell us what the fair market rent is. From there we factor in mortgage payment, taxes, insurance, and homeowners association dues (if applicable). If the fair market rent covers those items and other annual expenses when applicable, we’re good (minus 20% vacancy factor). [more on this here]

Keep in mind

that there are typically reserve requirements in most cases. “Reserves” as in liquid assets left available after down payment, costs, escrows are paid at closing. Typically you’ll need 6-12 months reserves for the subject property. Example: the payment on the subject property is 950/month, you’ll likely need 11,400 in reserves.

In some cases, in addition to the reserve requirement on the subject property, you’ll need an additional 2 months reserves for all other financed properties. I think it’s imperative to communicate this because the reserve piece is often ignored by many investors. You obviously don’t want to overextend yourself when making a purchase, and disregard the need for reserves. When that happens, things tend to fall apart.

Pay cash

Liquidate your assets and run the show. Even well healed investors don’t typically pay cash unless they have to because, as they say, cash is king. When you use up a substantial percentage of your funds to acquire a property, the pressure tends to be more stressful.

Hard Money Loan

These are great options if the property is in serious disrepair or if you need access to capital quickly. The luxury of speed typically comes with an aggressive price up front and monthly.

There are a number of ways to acquire more real estate and grow your portfolio. A blanket loan is just another tool in the box to help accomplish your goals.

They aren’t for everyone, but a blanket mortgage does prove to be a valuable resource for many growing real estate investors.

I invite you to reach out.

portfolio mortgage lendersIf you’re an investor, or you work with real estate investors, feel free to reach out to me directly to get your questions answered.

If I’m unable to help, I can most likely point you in the right direction at the very least. All the best!

 

investment property loans


Best Investment Property Loans

Let me be clear. When I say that these best investment property loans (portfolio loans) are ridiculous, I don’t mean that in a negative way. I say it from a ridiculously awesome standpoint.

Simply put, the residential mortgage guidelines have made things a bit difficult for real estate investors to grow their portfolio. But it doesn’t have to be that way anymore…

The Problemmortgage for rental property

When real estate investors are looking for a mortgage for rental property, and they already have several mortgages on investment properties, conventional guidelines say they cannot finance more homes for investment purposes.

Some lenders will allow up to 10 financed properties.

Some lenders will allow up to 20 financed properties (rare).

Most of the time, that’s only allowed if the home that you’re looking to buy is going to be your primary residence. So most investors with a portfolio of financed real estate are kind of stuck if they want to acquire more property.

The Solution

Real Estate Investment Loans, also commonly known as a portfolio loan.

These loans are designed to cater to the real estate investor who would rather not liquidate their reserves to purchase more real estate. This is specifically, a perfect mortgage for rental property.

5 Reasons the new Best Investment Property Loans are a Life Changer

No income is reported on the loan application.

The borrower is not qualified based on their employment. Think about it, if you’re buying a rental property, would you be making the payments on that loan from earned income? Heck no.

The tenant will be making the payment for you. That’s why you got into the real estate investing business to begin with. To get into an appreciating asset that pays for itself. It makes sense to approve an investment property loan based on the cash flow of the property. (see below for how the expected property cash flow is determined)

No maximum number of financed properties.

This one is huge. Why? Because so many real estate investors tend to hit a road block when they hit 10 financed properties.

Most think that at that point, their only option is to get a hard money loan (super high rate, very short term, paying several points). The good news is that Investment Property Loans (portfolio loans) are available, and common sense approvals exist.

Not nearly as many insane government guidelines.

These rental property mortgages are not treated like normal residential mortgages which are (what some would call) over-regulated.

Why?

Because these homes are being purchased for business purposes, and are treated more like how commercial loans are treated (approving the scenario based on potential cash flow and equity instead of borrower employment status). Why does this matter? Well, if you are reading this, I’m going to go ahead and assume you’re aware of the extremely strict guidelines in place that prevent many good people from buying a home because of a simple technicality.

Bottom line, government regulation involving home ownership has gotten tough, with investment property loans it’s not quite as bad.

Not necessary to put half down.

This is another reason its a great time to get a mortgage for rental property if you have a high number of investment properties already financed. You DON’T have to put 40-50% down to make it work. In many cases 20% down is acceptable. Obviously credit score and loan size will have an impact on required amount down. [Just ask me, I’ll let you know]

Not necessary to have perfect credit.

Let’s face it, life happens. Unforeseen tragedies happen that result in painful credit repercussions.

You shouldn’t have to wait 7 years in order to be able to get back into the real estate investing world. In many cases these are doable if at least 2 years have passed since a major credit issue (bankruptcy, foreclosure, short-sale). It wouldn’t be a bad idea to be at least 600 credit before applying.

If you’re not at 600 credit score yet, here is a great free tool to help yourself out when it comes to improving your credit score.

 


Loan Approval Based on Property Cash Flow | Best Investment Property Loans

Circling back to the comment above about no income being disclosed on the loan application.

No. We’re not getting back to the old days when anyone with a pulse is approved for a mortgage. These loans are fully underwritten and evaluated for ability to repay the loan.

But the ability for the loan to be paid lies within the monthly liability (mortgage payment/taxes/insurance/association dues) in relation to the fair market rent.

So how is fair market rent evaluated?

Pretty simple really. If you’re purchasing an investment property, the appraiser will do a standard 1007 rent schedule. This is used to calculate fair market rent for the lender. The lender will then take a percentage off of that amount (to account for possible vacancies).

If you already own the property, and are refinancing, the current lease will be evaluated as well as a 1007 rent schedule to be completed by appraiser.

A Huge Win for Non-Warrantable Condos

Investors who have been looking to buy non-warrantable condos have been having a tough time. They usually have to buy the property cash, or get a hard money loan. With investment property loans that’s probably not going to be necessary if the association is established and the phase is complete.investment property loans

A big problem with investing in condos right now is that the complex can be deemed “non-warrantable” due to a number of circumstances. [more about non-warrantable condos here]

Most of the time condos are labeled non-warrantable because the percentage of units owned for rental purposes is higher than what’s usually acceptable. This is when getting a mortgage for rental property is a great tool to have. The complex will be evaluated and a common sense decision will be made.

The complexes aren’t always approved, but it’s a great opportunity to explore if you’re and investor running into the non-warrantable condo issue.

Keep In Mind

  • Minimum Credit Score 600
  • Down Payment 20% minimum
  • Minimum loan amount $75,000
  • Must be at least 2 years out of major credit event (foreclosure/short-sale/bankruptcy)
  • Approval is based on property cash flow, not personal income

Experience is Requiredrefinance rental property

As I mentioned previously, these real estate investment loans are designed for folks who have been investing for at least 6 months.

Perfect for investors who are running into issues with hitting maximum number of financed properties.

Be prepared to provide legitimate evidence that you have been a real estate investor for at least 2 years. The ability to repay the loan is tied to your ability to manage the property effectively.

If you are fairly new to real estate investing, it will probably be best to get a normal conventional loan.

I invite you to reach out.

portfolio loans

If you are looking for the best investment property loans in your market I encourage you to reach out to me to see I might have the right fit for you.

You will not be redirected to some intern in a call center. You will connect with me directly.

If for some reason I am unable to assist, I will most likely be able to point you in the right direction at the very least.

 

real estate investment loans

Investment Property Loans | Portfolio Loan for Real Estate Investors


What is a Non-Warrantable Condo?

Finding out that the condo you’re looking to buy is considered to be a non-warrantable condo can be heartbreaking.

When a condo is identified as a non-warrantable that means it does not meet conventional guidelines (meaning Fannie Mae and Freddie Mac won’t buy the loan).

This is kind of a big deal because Fannie Mae and Freddie Mac pretty much buy all conventional loans. If they won’t give the thumbs up on the condo, you and the seller are in a bit of a tough position.

The first thought that comes to mind for most people is “okay, well what about FHA, VA, or Rural Development? Why don’t we just do a government loan?”

Great question.portfolio mortgage lenders

For the condo to be eligible for FHA financing, it has to be on the FHA approved condo list. If it’s not already on the list, it’s probably best you move onto something else because getting a condo on the FHA approved condo list isn’t exactly a walk in the park.

Same thing goes for getting a condo with a VA loan.

The department of Veteran Affairs actually has their own list of approved condos. Again, not the easiest thing in the world to get on that list.

For a Rural Development loan, the condo just needs to meet the conventional condo guidelines to be eligible for financing. There is no USDA Rural Development condo approved list.

Chances are, if the condo doesn’t meet conventional guidelines, it probably doesn’t meet government guidelines either.

What makes a condo non-warrantable?

Some companies will have their own overlays as to what is considered acceptable, but we’ll look at some of the most common reasons for a condo to get flagged as non-warrantable:

  • Projects where a single entity owns more than 10% of the total units (for projects with 21 or more units).
  • Project has inadequate insurance coverage.
  • Condo project has similar characteristics and is managed as a hotel (condotel)
  • Project (HOA, sponsor, developer) is in litigation that relates to safety, structural soundness, functional use or habitability of the project.
  • New construction condos.
  • Established condos that have additional phases in need of completion.
  • High percentage of non-owner occupied units.
  • High number of units being delinquent on association dues for more than 60 days.
  • Project budget is not appropriately structured.
  • And many more.

The most frustrating thing about buying a non-warrantable condo…

Many lenders wait until the last-minute before ordering a condo questionnaire (which tells them if the condo is warrantable orportfolio loans not).

Why?

Well, your guess is as good as mine. Maybe it’s their “policy” to get the condo questionnaire at the final stages of the loan approval process. Maybe the loan officer didn’t realize how detrimental a non-warrantable condo can be to the process.

It would seem that the most logical thing to do would be to get the condo questionnaire completed before even ordering the appraisal! Think about it, a condo questionnaire costs about $150 (sometimes free), and an appraisal costs $400 – $500. Wouldn’t it make sense to order the questionnaire first, to see if the home can even be financed to begin with?

But many times the opposite happens. Borrowers get under contract on a home, get appraisal done, get fully approved though underwriting, take selfie’s of themselves in front of their new home a week before closing, and then get a call an hour later from their loan officer who say’s “hey man, I just heard from Freddie Mac, they said your condo is non-warrantable”.

Really?

The loan officer is going to place the blame on Freddie Mac?

I know it seems insane. I agree. But there is hope…

How to buy a Non-Warrantable Condo

There are 3 ways to buy a condo that is not warrantable:

Buy the condo with cash.

Yeah, because so many people have hundreds of thousands of dollars lying around.

Buy the condo on land contract.

This is where the seller acts as the lender. This is a good option, but the problem is that there aren’t a ton of sellers willing to do this. Buying on land contract really limits you to what you can buy. Also, land contract holders usually want to be paid in full within 5 years.

Buy the condo with a portfolio loan.

You can find portfolio loans with small banks or credit unions. These are what some would call “common sense” loans. Portfolio loans provide the opportunity  for borrowers (and condo projects) to get looked at from a common sense standpoint.

Often times portfolio loans are a breath of fresh air for folks who have been denied for traditional financing. It gives them an opportunity to own the home they want if the big picture makes sense.non-warrantable condo

Portfolio loans are not “no-documentation” loans.

All income has to be verified. All assets have to be verified. An appraisal has to be done. All components of the approval process have to be legitimate. The main difference between the portfolio loan approval process and the traditional loan approval process is the chance to get the whole story looked at.

Portfolio lenders do not take a check-in-the-box type of approach unlike the traditional lending process. They/we truly look at all of the circumstances when making a decision.

These loans are kept on the lender’s portfolio, and are not sold on the secondary market like most loans.

The pricing on portfolio loans vary based on risk. And every portfolio lender has their own take on what each type of risk costs.

You’ll typically find that rates on portfolio loans are reasonable when considering the alternative (renting).

If you have been told you’re stuck because of a non-warrantable condo…

portfolio loans

I invite you to reach out to me.

You won’t be talking with some new loan officer, or a customer service rep, you’ll be connecting with me directly.

I have been able to get many borrowers approved when other lenders said it couldn’t be done.

If I am unable to assist, I should be able to point you in the right direction at the very least.

pre approved home loan


Non-Warrantable Condo | Financing Available | Portfolio Loan

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

How to Refinance Land Contract

Everything you need to know about how to refinance a land contract and how to get approved.

Land contracts are great.

Especially for folks in unique scenarios who don’t meet traditional lending guidelines, buying a house on land contract can often be a great alternative to renting.

The problem is that most land contracts have a requirement that the home is refinanced within 3 to 5 years.

Let’s take a step back for a second though.

What is a land contract?

A land contract (or contract for deed) is a private loan between the buyer and seller. The seller acts as the mortgage lender. So instead of the buyer going to ABC Mortgage Company, they get private financing from the seller. In which case the seller funds the transaction and accepts payments from the buyer for the duration of the loan.

Borrowers seek homes for sale on land contract because they know they have unique circumstances.

Here are some reasons someone might seek to buy a home on land contract:

Circling back to the borrower’s predicament…

As I mentioned, many (most) land contracts have a requirement that the borrower is to obtain traditional financing within 3-5 years. What often happens is that borrowers still find themselves in a position where traditional financing might not be an option yet. Maybe their credit still isn’t cleaned up, or maybe their income circumstances are still unique.

In this case what do you do?

Well, you either sell the home, and seek a new home under land contract. Or you find a lender who offers portfolio loans. Portfolio loans are designed to get borrowers approved for home ownership who don’t quite meet traditional lending michigan portfolio lenderguidelines. They are mortgages that are funded in house but the credit union or bank, and are kept on their “portfolio”. Portfolio loans provide a common sense approach to the mortgage lending process.

Portfolio loans are a great alternative to buying on land contract. Especially a great option to consider when it’s time to refinance a land contract.

Another problem with land contracts that is often overlooked is the fact that land contract payments are not reported to the credit bureaus. Imagine you’ve been paying your mortgage payment on time for the last 3 years, but those payments are not reflected on your credit report?! Wasn’t the whole point of getting into a land contract to get back on your feet and prove to the world that you are a credible homeowner?

Not having the land contract payments reported to the credit bureaus presents a two-fold problem:

  1. You don’t get any pat on the back for on time payments.
  2. You don’t get any boost in credit score for having a housing payment history at all.

Having a housing payment history is paramount when talking about getting a traditional mortgage.

Is it possible to get approved for a traditional mortgage without having a housing payment history on your credit report? Sure it is. But having a housing payment history on your credit report is certainly a strong compensating factor when applying for a new mortgage. With a land contract, it’s pretty much non-existent.

The good news is that your lender will probably ask you to provide proof of 12 month’s payments on the land contract. They will be looking for consistency and prompt payment history. If you had any payments that were more than 30 days late, it’s a big red flag. If you are unable to provide 12 month’s checks of land contract payments or at least 12 month’s bank statements showing the land contract payments being withdrawn from your account, it could be a major problem.

4 Steps to a Successful Land Contract Refinance:

Follow this guidance to set yourself up for success.

1. Make sure the land contract gets legally recorded.

It’s not expensive, and it’s pretty easy. If the title company didn’t have the land contract recorded with the county when you bought the home, it’s not the end of the world. Call the county recorder’s office, or register of deeds office.

Tell them you need to get your land contract recorded, and they will point you in the right direction. In order for a lender to perform a refinance of that land contract, there needs to be proof it was recorded (preferably when the land contract was originally executed).

2. Make your payments on time.

I can’t stress enough how important it is to not have any late payments on your land contract in the most recent 12 months if you’re looking to refinance. Having even one late payment can result in denial, or a requirement to have more equity in the house in order to make an exception for refinance approval.

3. Keep records of everything.

Do NOT make your land contract payments in cash. Pay by check or auto withdrawal to the land contract holder. If you pay your land contract payments in cash, you might as well pay with happy thoughts and smiles. It’s extremely difficult to track the exchange of cash, and of course having the ability to track and verify everything on a refinance is key.

4. Work with a lender who offers portfolio loans.

Even if you think you might be eligible for traditional financing when its time to refinance your land contract, working with a portfolio lender will only set you up for success. Reason being is that there are so many moving parts in a mortgage approval. If something is discovered half way through the refinance process that makes your loan deniable on traditional financing, then you have a chance to get it approval on a portfolio loan.

It’s a plan B, plain and simple. Heaven forbid something goes wrong, you don’t want to have to start from scratch with a new lender who offers portfolio lending, and have to pay for an appraisal all over again. You might as well start with a lender who offers traditional lending (conventional/FHA/USDA/VA) as well as portfolio loans.

 

portfolio loans

If you are looking to refinance your land contract.

I invite you to reach out to me.

You won’t be connected with a robot, or some intern. You’ll be connected with me directly.

If I am unable to assist, I can probably point you in the right direction. At the very least you’ll walk away with a plan on what to do to set yourself up for success.

pre approved home loan

 

Buying a House on Land Contract Eveything You Need to Know


How to Refinance Land Contract

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

 

How to Qualify for a Portfolio Loan

Portfolio loans are mortgages engineered to bring common sense into the lending world.

Imagine you’re a foreign national who is relocating to the United States. You have a superb employment background. You have assets set aside that are more than adequate. You have a job lined up in the US. The problem is, you have a unique VISA that is unacceptable on a conventional, FHA, or even most Jumbo products.

In this case (and many others), a portfolio loan will most likely be the solution to your problem.

A lender who offers portfolio loans will look at your scenario for what it is. It’s not your typical “check in the box”, black and white type of process. But there certainly is a method to the madness.

The challenge with the traditional lending world is that it has become so highly regulated that even a borrower who how to qualify for a portfolio loanis truly back on their feet has to wait a certain number of years before being eligible to obtain financing on a home. This state of what some would call “over-regulation” is due to years of abuse in the system.

The fact of the matter is, in the mid 2000’s people were buying homes that they couldn’t afford. The result was catastrophic financial loss by nearly everyone. The collapse of the real estate market trickled down into almost every industry in all corners of the country. Now we live in this world where even A+ borrowers have a number of hoops to jump through in order to finance their home.

In a moment we’ll look at exactly how to set yourself up for success when applying for a portfolio loan. First, let’s take a quick look at the various instances where a portfolio loan may be called for:

People are blown away when they find out that portfolio loans exist. Relived to discover that they are treated like a human being. With dignity. Not treated like a number.

So here is how you can set yourself up for success, and strengthen your ability to get approved for a portfolio loan…

how to get pre approved portfolio loanBe ready to tell your story

There are so many moving parts. From income, to assets, to property, to credit. Each piece has to be evaluated in the most careful and thorough manner. Be prepared to document each piece of your financial fingerprint with exceptional detail.

michigan first mortgageBe honest

Don’t waste your time trying to create an illusion that your ducks are in a row if they’re really not. It will only cause unnecessary delay and extreme frustration for everyone involved. You have to put your cards on the table because trust me, eventually the skeletons in you closet will be revealed.

When you are completely transparent from the beginning, you allow your loan guy to wrap his head around your circumstances in full. By doing that, solutions can be reached more quickly.

adam lesner portfolio loanUse technology to your advantage

If you are planning on getting a loan it’s a good idea to use the tools that simplify the process. It’s amazing what happens when everyone is able to stay on the same page without having to wait for the mail man to deliver your documents.

  • Fax
  • Email
  • Text

Those are 3 extremely basic tools that save hours, days, even weeks in the process.

Be realistic

If you’re getting a portfolio loan, try to understand that your circumstances are probably more complex than someone who is getting a conventional loan. You’re most likely going to need to be willing to provide explanation(s), and documentation to back up your story.

Your interest rate may not be the same as what you see on traditional mortgage ads. Why? Well, remember, the lender is taking a risk that most lenders are not willing to take. There is a cost that has to be taken into consideration when taking on that level of risk.

Rememberways to portfolio loan hevan

A portfolio loan is a vehicle to help you accomplish your home ownership goals. It’s a temporary solution for temporary circumstances. Once you’re eligible for a more traditional loan… refinance into a more traditional loan (if it makes financial sense).

Keep in mind:

  • Minimum 10% down
  • No PMI
  • No pre-payment penalty
  • Income and assets must be verifiable

If you have been told you cannot get a mortgage because of a seemingly simple technicality, a portfolio loan may be a life changer for you.

 

 

 

 


 

I Invite you to reach out.

 

Get your questions answered.

 

 

 

 

 

 

 

 

 

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.