You may have heard about pre-qualifying for a mortgage loan from friends or even from the television. If you are just starting to look at homes for sale, you may want to get pre-qualified by a lender for a mortgage loan. Not only does this make realtors and their buyers take you more seriously, it can expedite the process so that when you do find that special home you can make it yours in very little time. Pre-qualifying means that you have gone to a lender before you found a home and you ask them to qualify you for a mortgage loan. You may be asked to give a general price range of the homes that you will be looking at, or your income will limit you to a certain price range. If you are pre-qualified, it means that based on all the information provided ahead of time, you would qualify for a mortgage loan that meets all the lender’s requirements.
Should I Refinance?
Understanding Mortgage Loans
While pre-qualifying is generally a good idea, you may not want to rush out and apply for the first mortgage loan that you find. Instead, you’ll want to understand the types of loans and financing options that are available. First, there are 100% mortgage loans, with a appeal around these mortgage loans wherever you go these days. These mortgage loans mean that you do not have to make a down payment to get into the house. You usually have to have fairly good credit and a stable income to get these types of mortgage loans.
If you have a hard time coming up with the percentage of the sales price that you need, you may want to ask family members for help, or as an alternative, you could get someone with better credit to co-sign the mortgage loan for you. This means that the person who signs on the loan with you will also be responsible for the debt to ensure that the monthly payments are made.
Making Your Mortgage Happen
When you find a home that you would like to buy, it’s time to make it happen. Because you are pre-qualified for a mortgage loan, the process will be a lot faster and can close within a week. The closing is when the buyer and seller meet and the house is transferred from their ownership to you and your lender. The meeting is usually very brief and consists of the signing of papers, delivering funds due for closing costs, and your portion of the sale price of the home, if you do not have a 100% home mortgage loan. When you leave, you will likely have keys to your new home, and you will be the proud new owner of a mortgage loan payment! Your first mortgage loan experience will likely be a bit of a whirlwind, but it is important that you ask questions and get the answers you need.
Hard Money Mortgages
National Pacific Mortgage eats, drinks and sleeps loans and current news in the financial markets and the related real estate and the mortgage lending industry. We like to jot down pertinent information and news that might affect our business and our clients. It is not news that there is a lot of turmoil in many of the United States’ real estate markets today. There is also a lot of misinformation and unknown information with regards to many of the sub-prime, Alt A and A paper, and hard money mortgage loans that were originated in the past few years. So, how is this affecting hard money lenders? If you own property in some of the states and counties that have been hardest hit it is likely that most hard money mortgage lenders will have increased requirements and may not be interested in lending on your property at all until the market settles out. Many residential markets in California, Florida, Nevada and Arizona to names a few, are on special lists that data companies are providing to lenders and are being labeled as higher-risk markets due to their pricing volatility today.
Until further notice, National Lenders are going to be more restrictive with residential (SFR) property underwriting guidelines in reference to hard money mortgages. Maximum LTVs for single family homes will be in the ~65% range with exceptions made on a case-by-case basis…and rare. Property values are in a state of decline in just about every market right now and has forced us to be more selective with the deals that are selected.
Ok, let’s talk about 100% financing. Many people have become accustomed to 100% LTV loans (and higher) over the past few years. Unfortunately, many banks and lenders have been very irresponsible in how they lend money and we are starting to see the ill effects of these policies today. Banks are beginning to close up shop, lenders and investors who have purchased loan packages on the secondary market are going after lenders and mortgage brokers, and even Congress is holding hearings. What many people do not understand is that hard money lenders typically are MORE conservative when underwriting a loan. Why is this? Simple, private money and hard money lenders need to make sure that the collateral is good and that in the even they have to take a property back, they are secure and can sell the property in a timely manner. Most banks use a property valuation that estimates a 6 month to 1 year market time for selling a property, a private equity lender has to sell the property in 90 days or less typically.
You need some “Skin in the Game” - You need to have a significant amount of cash going into the deal if this is a purchase transaction. Why? Simple, we need to know that you are not going to just walk away from the deal provided it really isn’t the deal of the century or you get in over your head. This is the most important item people looking for a purchase loan or ARV purchase loan.
This is not meant as a joke. This is something that 80% of the people that call us every day are looking for and can’t seem to wrap their heads around. Lenders need to see that borrowers are willing to back up claims that they have the deal of the century. The best way to do this is to show them that you/the borrower believes it is the deal of the century by putting their own dollars into the deal as well. IF you are willing to do this put a good information package together on the deal, how much money you are looking for, how the funds will be used, and some information on the exit strategy. This will set you apart from the crowd and get the lender’s attention quickly.
Real Estate Broker, CA Department of Real Estate License # 01496870