Mortgage and Portfolio Loan Guide

E008: Why the Ability to Repay is Crucial

E008: Why the Ability to Repay is Crucial

 
 
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Demonstrating the ability to repay is perhaps the most important piece of getting approved to buy a house. Here is why.

E001: How to Build Credit to Buy a House

E001: How to Build Credit to Buy a House

 
 
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Episode 1 of the Mortgage Guide podcast. Building credit is crucial when seeking home financing. Here are some tips to carry with you.

Original video here: https://youtu.be/oqgEkE_zYQE

Full article here: https://www.balanceprocess.com/credit/

More on portfolio lending: https://www.balanceprocess.com/what-is-a-portfolio-loan/

What is a Portfolio Loan?

Here’s the deal… there is no such thing as a cookie cutter scenario when it comes to home financing. Whether it’s FHA, Conventional, Jumbo, VA, USDA, etc… everyone’s situation is different. If you do not qualify for traditional financing a portfolio loan may be your ticket to mortgage approval.

Portfolio loans are a step beyond unique.

What is a portfolio loan?

Portfolio loans are designed to get folks approved when they are not eligible for any “normal” type of financing.

These types of mortgages are commonly funded by small banks or credit unions, and are kept in their “portfolio”. The reason portfolio loans are typically found at local banks or credit unions is simply because these companies are more home-grown than your common mega lender. They have every reason to help their local economy grow. They know that if they give a borrower a chance when no one else will, they will be a loyal client for life.

Small banks and credit unions are built more around relationships than any lender you’ll find. They are willing to take the risks because they look at the whole picture of a borrower’s situation.

Getting a portfolio loan is more of a common sense type of approach to mortgage lending, unlike your conventional/FHA mortgage that is pretty much a check-in-a-box, black and white type of approval process. With a portfolio loan, the story matters.

When is a portfolio loan necessary?

portfolio loan past credit issuesRecent Credit Issues

Many times a portfolio loan is called for when a borrower has damaged credit. Maybe their credit was ruined because of a nasty divorce. Maybe their credit was ruined due to an injury. This would have an impact on their ability to earn for 12 months.

Sometimes this forces foreclosure, possibly bankruptcy. Really any situation where the borrower was in a rough patch, but now is back on their feet.

You see, with any normal type of mortgage, there is a waiting period you have to meet before being able to buy a house. Usually it’s at least 3 years before you can do anything if there was a recent bankruptcy or foreclosure. But should it really be that way if the situation was truly temporary, and the borrower is back on their feet? The answer is no. The result, Portfolio Loans.

Examples of recent credit issues:

  • Bankruptcy
  • Foreclosure
  • Short-sale
  • Ex-spouse ruined credit during nasty divorce
  • Piled up medical bills
  • Misc. collections
  • Tax lien
  • Judgment
  • Low credit scores due to high credit card balances
  • Late payments in last 24 months

Unique Property Type

Sometimes the property that the borrower is looking to buy or refinance is particularly unique. So unique that it does not meet the necessary guidelines to be eligible for conventional, FHA, etc. financing.portfolio loan unique property

This is common with condominiums because the homeowners association gets a full review by the lender to determine its financial stability. Many times condos are deemed “non-warrantable” because the complex or homeowners association does not meet the Fannie Mae, Freddie Mac, or FHA condo guidelines. [full article on Non-Warrantable Condos here…]

Examples of why condos are sometimes deemed as non-warrantable:

  • Homeowners association has a lack of reserves
  • Inadequate insurance coverage
  • Inadequate flood insurance coverage
  • Too many units are tenant occupied (renters)
  • The complex is under construction or in a phase that calls for more construction
  • Too many units are owned by 1 person or entity (investor owns high percentage of units)

Other unique properties that may call for a portfolio loan:

  • Commercially zoned property that is being used as residential
  • Berm home
  • Log cabin (if not typical in the market)
  • Any type of home that an appraiser has a difficult time finding comparables for (recent sales of similar homes)

Foreign Nationals

When folks move to the US and want to buy a house right away, they are commonly faced with 2 major problems: they don’t have credit established in the United States, and they do not have income established in the United States.

This is a perfect opportunity to pursue a portfolio loan. There are some main things the borrower would want to provide if they are a looking to get a portfolio loan, and are new to the United States.

A foreign national would want to provide:

  • Type of VISA, and all VISA applicable documentation
  • Previous 2 year income history in previous country (paystubs/tax returns)
  • Asset statements
  • Letter explaining intent to stay in the US
  • Proof of income established in United States (employment letter, paystub)

Investment Property Loans | Approval Based on Property Cash Flow

Most real estate investors reach challenges when attempting to expand their real estate portfolio, and are looking to finance those new investments. The general investment property loansassumption is that their only option is to get a hard money loan or buy the new home cash.

That is not true in this market. With a portfolio loan, you can have an unlimited number of financed properties. What’s more is that these types of scenarios are approved based on property cash flow, not borrower income circumstances.

That would make sense wouldn’t it?

To approve the property based on cash flow? Since the rental income will be paying for the mortgage/taxes/insurance/association dues, the deal is evaluated based on fair market rent. These are done on purchase, refinance, and cash out refinance loans.

These types of rental property loans are phenomenal for seasoned investors who are looking to grow their real estate portfolio. [full article here…]

Unique Income Circumstances

We often see borrowers that are financially stable, have great credit, solid assets, but don’t qualify for a mortgage due to a simple technicality regarding their income situation. This is another great opportunity to explore the possibility of getting a portfolio loan.

Keep in mind, portfolio loans are not necessarily “stated income” loans, where the borrower tells the lender how much they make, and all is well (like the old days before the housing meltdown). Portfolio loans are still full documentation loans, but are looked at from a common sense standpoint.portfolio loan unique income

For example, let’s look at 1099 employee. These are folks that typically are considered “private contractors” and are given a 1099 at the end of the year to show earnings (instead of a W-2 like most employees). In this case, lenders need a 2 year history receiving that type of income. The reason for that is 1099 employees will sometimes have some unique write-offs on their tax returns that could possibly have an impact on what their actual net earnings are.

The problem with this is that many times 1099 employees are paid on a salary or set amount of income for a set amount of time. So basically, the borrower is guaranteed $X for the next X number of months, but can’t use that income to qualify because they don’t have a 2 year history of being a 1099 employee? Does that make sense? Heck no! Especially if that individual has worked in that same line of work in the past and has a degree in that field.

The reality is that these scenarios are fairly common, and people think they are stuck until they get a breath of fresh air (portfolio loan).

Bank Statement Loan | Self-Employed Borrowers

If you are a business owner and have significant write-offs that your CPA helps you take advantage of (most business owners), a bank statement loan program may be the best solution for you. With this type of portfolio loan, your approval is NOT based on your tax returns.

Your income is calculated based on 24 months bank statements (12 months on case by case basis). You can use personal or business bank statements depending on your scenario. You must be self-employed with the same business for at least 2 years. [full description here]

If you are looking for a second chance…

A portfolio loan could be the perfect fit for you. I talk with folks every single day, all over the country, who are seeking a common sense type of approach to mortgage approval. If I am unable to help, I usually can point them in the right direction at the very least.

You won’t be talking with my assistant, or some loan officer who is dabbling in mortgages. You’ll be talking with me directly. If I can help, awesome. It will be an honor. If I can’t help, I’ll do everything I can to connect you with the right lender so that you can accomplish your specific home ownership goals.

Main items to keep in mind when seeking a portfolio loan:

  1. Available on purchase or refinance.
  2. At least 10% down (no PMI).
  3. Down payment may be gifted if you have at least 5% of your own funds.
  4. Income and assets must be verifiable.
  5. Primary residence, second home, and investment property options available.

 

portfolio loans

I invite you to reach out to me.

Get your questions answered.

 

pre approved home loan

If you or your clients are in any type of unique scenario, please feel free to reach out to me directly for an opportunity to get approved for a portfolio loan. 248-894-2763


 

What is a 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.

6 Proven Ways to Close on Your Home Lightning Fast

How to Buy a House Fast | Most Important Thing You Need to Do

“Dude, so do you think we could close next week?”
“Dude, no. You didn’t even send me your stuff yet.”

I know this might be a shocker for you, but lenders actually want to close your loan. In fact, if it doesn’t close then they have wasted countless hours and resources with nothing to show for. Just like Realtors. The thing is… we have to cover our ‘you-know-what’, and make sure the loan meets all the fun and amazing guidelines that have been put into place.

Here’s the kicker, there are ways to speed up the process and make EVERYONE look good. Want to know how? Awesome! you’ve come to the right place. 

First of all, let’s get one thing straight: It’s going to take about 30-40 days to get to the closing table. That doesn’t mean the clock starts ticking when you found the house on Zillow. That means once you have a fully executed purchase agreement, and you tell me the inspection came back with flying colors, then we get rolling and order the appraisal. Is there such thing as closing quicker than 30 days? Of course. And if you use these techniques below, I promise you’ll be setting yourself up for success.

  • Get your crap together. If your lender has given you a list of stuff that is needed, take an extra 5 minutes to make sure you’ve gotten everything requested. An extra 5 minutes of making sure you included all pages on tax returns and bank statements will save you a couple necessary trips to the fax machine, and possibly a week of being in process. Click here for the list that is detailed and fool-proof.
  • Order inspection as soon as you have an accepted offer. This should be your next phone call after getting the good news that the offer was accepted. Many times your Realtor or lender will have a recommendation as to who should complete the inspection. You want to make sure the home is in reasonable condition, but you don’t want to waste money on an appraisal if the inspection comes back with more than you’re willing to take on. So it’s important to get the inspection done ASAP so you can move onto the appraisal, and get rolling.
  • Be fricken honest. Don’t withhold information from your lender thinking that will reduce bumps in the road. I promise, it will only make things worse. If you communicate something that you think might be a problem, your loan officer will now can be proactively working on a solution for you. The last thing you want is for us to find out something last-minute, and scramble to meet the contract date.
  • Answer your phone. Or at least respond to emails/texts. I know this one seems obvious, but dropping the ball on communication can not happen. Everyone needs to be in the loop as much as possible to simplify the process and maximize efficiency.
  • Get your homeowners insurance in-line. I can’t tell you how many times “the last thing” we’re waiting on is a declarations page from the homeowners insurance company. Not because the company is slow, but because the borrower waited till 48 hours before closing to get a quote. Once you have the appraisal, give your insurance guy a call to put together a policy.
  • Stay in town. Or at least have the means to easily communicate while you’re gone. Buying a home is obviously a big commitment, which involves a lot of moving parts. If someone falls off the map, everything in the process can come to a screeching halt, causing major delays. But if you are leaving, give all parties a heads up, and double-check to see if there is anything that is needed from you.
I can tell you with absolute certainty, if you keep these things in mind when you’re buying a home things will go much smoother for you. 

 

There are so many factors that can create challenges to overcome. Some are fixable, some aren’t. If you let a little bit of your OCD side come out and play, it will work wonders in terms of detail and promptness.

What bumps in the road have you experienced recently that caused a seemingly unnecessary delay?

4 Things to Stop Doing as Soon as You’re Pre-Approved

Isn’t it fun getting a mortgage pre-approval?

You get your credit pulled by the nice guy in a tie at the bank. You tell him about all the glorious money you have to put down on your home. You drink coffee and explain how you make a clean salary, and you hardly ever use your credit cards…

Of course he is happy to print off your crisp, clean pre-approval letter. He connects you with the local real estate genius, and the house hunting begins.

All of the sudden your dog gets sick and you have to pay $900 to keep it alive. “Well sorry ole’ Sparky but I can’t dip into the family savings, let’s use the AMEX to keep the ticker ticking.”

A week later you finally sell your BMX racing bike on craigslist and you’re feeling good with a nice $1,500 deposit into the rainy day fund.

Jimmy from high school gives you a ring and asks you to be a partner in his new business venture, and you accept the offer. C’mon, YOLO.

There was a sweet deal going on at Buy Here, Pay Here, and you finally got the Bronco 4×4 you’ve always wanted.

Uh oh, why is my mortgage guy asking for a paper trail for this stuff? Any why has my credit score tanked? This new business is gonna kill it. What, do they want a blood sample too?

  • Don’t use your credit cards past 30% of you available balance. It’ll change your scores in a way you and your lender won’t like. Sometimes (depending on how long it takes to find a house) your credit may need to be pulled again.
  • No large deposits in your bank account that can’t be easily sourced. (anything other than salary income). Large deposits raise red flags and need to be sourced. What the lender wants to know: “where did it come from?”  “do you have mysterious liabilities we don’t know about that you’re paying back?”
  • Don’t change jobs. Can that wait while you make one of the biggest investments of your life? Consistent income helps strengthen the likelihood of your file being approved.
  • Stop buying stuff. When your lender pulls your credit they are taking into account all of your liabilities, and taking into account what your income is in order to calculate what you’re approved for. If your liabilities increase, there is a chance your pre-approval will decrease. Make sure to ask how tight your ratios are.

Remember, the lender is on your side (believe it or not). We WANT to earn your business. But if you decide to change your financial circumstances after you get pre-approved for a mortgage, just understand that there is going to be some leg work involved to put the pieces of the puzzle together.


E005: 4 Things to STOP After Pre Approval


Tip of the day: When you get pre-approved, provide all your stuff up-front. Tax returns, W-2s, pay stubs, bank statements. This will minimize room for error or misunderstanding.

portfolio mortgage lendersNeed a mortgage pre-approval?

I invite you to reach out to me.

Get the pre-approval you’re looking for from me. You won’t be talking with some newbie. You’ll be talking directly with me, Adam Lesner. If it turns out I can’t help, I’ll usually be able to point you in the right direction at the very least.

pre approved home loan

What “crazy” item did your lender ask you for that seemed absolutely ridiculous?

Be sure to subscribe to my YouTube Channel to get all the best mortgage stuff on a weekly basis. 


How to Get Pre-Approved to Buy a House with Ease!


 

Finally! Mortgage Loans for Bad Credit

Applying for mortgage loans for bad credit can be uncomfortable to say the least. I can’t tell you how many times I’ve heard the same story. A great family, with strong stability fell on hard times. They had to let their house go because of a serious injury, downsizing of a company, or loss of a loved one. In many cases those folks get back on their feet within 6 months to a year, and would like to buy a home again. However, with the lending guidelines in today’s world, that can be quite a challenge.

The good news is there are lenders out there that will treat you like a human being. Mortgage loans for bad credit do exist, and I’ll tell you how to find them WITHOUT having to jump through a million hoops.

How bad can your credit be?

Well, it depends…

Credit scores and time since the blemish really aren’t the main factors. The main factor is “why”. What’s the story behind the credit problem? Were you blatantly irresponsible? Or did you have a rough patch?

Let’s say you had a foreclosure a year ago because your company outsourced your job after they cut your pay 50% a year before they let you go. You were in a position that you genuinely couldn’t afford to make your payment and had no choice but to foreclose. As long as you can some how prove the course of those events taking place, and show a previous history of being financially responsible, you definitely have a chance to get approved.

Now, if you “gave your house back to the bank” because you noticed home values were declining, that’s another story. It has to make sense. There needs to be proof that there was a legitimate reason for the cause of the credit issue.

Who can offer mortgage loans for bad credit?

The vast majority of lenders, especially big banks, and mega-originators, only write “A-paper”. They are (for the most part) extremely conservative with what they will approve, and who they will approve. You want to look for a small to mid-size local company. Maybe a credit union or a company who has some sort of partnership with a credit union. Small local banks are good too.

Why? These types of companies are typically privately held. They are more likely to be committed to building and strengthening relationships in the community, and bend over backwards to meet the needs of their clients. I’m not suggesting that there aren’t awesome people that work at BIG companies. All I am saying is that their hands are tied many times because of the company they represent.

There is something special about reaching out to someone and telling them you can help when no one else would even give them a second look because of their bad credit. Really giving folks a second chance without making them wait 2-7 years to get back on their feet.

What can you expect with these bad credit in-house loans?

  • Primary residence only.
  • Usually 10% down will be required. Gift okay.
  • The interest rates may be higher than typical loans.
  • No monthly mortgage insurance even if you put less than 20% down.
  • Paying points may be required.
  • Okay on purchase or refinance. Even cash-out refinance is okay in some cases!

Getting mortgage loans for bad credit isn’t for everyone. Typically it’s a short term fix for people with unique situations, but know that home-ownership is right for them. Once they’re back on their feet within a couple years, it would most likely make sense to refinance into the loan that meets the needs of their updated circumstances. Did you know this type of opportunity was available right now?

portfolio loansI invite you to reach out to me.

Get your questions answered.

You won’t be talking to some newbie or intern, you’ll be talking with Adam Lesner directly. We don’t get everyone approved, but we do our best to find the right loan if it makes sense.

pre approved home loan

Check out video below:

Adam Lesner NMLS 198818 | Mackinac Savings Bank NMLS 401686 | Main offices in 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, Ohio, Oregon, Tennessee, Virginia, Wisconsin.  

 


Zero Down Mortgage – USDA Home Loans

RD loan

Zero Down Mortgage

Did you know that even if you’re not a veteran you can buy a home with a zero down mortgage in many areas? And it’s not too good to be true. There are, however, some restrictions regarding location and income.

The United States Department of Agriculture (USDA) Rural Development guaranteed loan usdalogoprogram is a government loan designed to help low-moderate income earners purchase a home in “rural” areas. However, you may be surprised to see what the government considers to be rural and low-moderate income.

Income

The income restrictions will vary across the country and even across each state. Here is an example for my local market in Livingston County, Michigan. For a guaranteed RD loan the annual household income must be at $93,450 or below. Even if the spouse is not a borrower on the loan, their income will be used as a factor in the household income. USDA looks at the whole picture, not just the applicant. You can use this tool to help you get an idea if your family qualifies for an RD loan in regards to income. Remember when using that tool, you’re looking for qualifying on the guaranteed loan, which will maximize your buying power from in income standpoint.

Location

Many folks are shocked when they take a look to see that their neighborhood is in an area that is considered to be a “rural area” which allows them to get a zero down mortgage. Just outside the metro Detroit area and not far from many major cities Rural Development financing is available. Although the mapping tool on the USDA website is not 100% accurate, you can use this tool to give you an idea of what areas are eligible. You may be pleasantly surprised to find that you don’t have be living “out in the sticks” to be eligible for Rural Development financing.

What is also exciting about RD loans is that you can buy a condo with this program as long as it’s within the eligible geographic limits. Crazy right? Some people call RD loans “farm loans” and you can buy a condo with them. How awesome is that?!

What to Expect

  • Make sure you have your ducks in a row in respect to credit. You don’t need to have perfect credit, but it needs to be reasonable.
  • The process may take a little bit longer than other loans because it needs to get final approval by USDA after the lender approves it. However, right now in my particular market in Michigan, the RD turn time is 2-3 days. So not a significant delay currently.
  • Mortgage insurance is significantly less than FHA on a monthly basis, about 1/3 of what it costs on FHA.

There are so many expenses to consider when buying a home. So if you have an opportunity to buy with a zero down mortgage, and you qualify, why not take advantage of that opportunity?

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