Welcome to 2018. I
think it is a good time to review all the available loan types in today’s
lending world and what they are uses for.
Although there has been changes in the industry There are still options
for people to get financing for both their primary homes and their investment
property. There are creative options for
those that are self-employed that don’t show all their income on their tax
returns. Of course, we have the basic
home loans like FHA, VA and Conventional loans that are still priced really
good for an economy that is starting to build steam. On the end of the spectrum we have Hard MoneyLoans available for those investment properties that banks may have said no to
for one reason or another. All these
loans have their purpose in today Real Estate Markets.
Let’s start a look at the most basic of loans that are used
for purchasing and refinancing primary residences. These loans are, what we in the industry call,
“A” paper loans. These loans also fall
under, what the government calls, Qualified Mortgages or QM loans. These loans are full of regulations designed
to protect the consumer from lenders that may not have their best interest in
mind. One of these loan types is the
Convectional loan and is the most widely used type of mortgage. The Conventional Home loan will allow buyers
to purchase home and put as little a 5% down.
A Conventional home loan is privately insured which means if you put less
than 20% down you will be required to purchase mortgage insurance from a
private institution. The same would
hold true for a refinance, you would need greater that a 20% equity position in
order to refinance a Conventional loan without Private Mortgage Insurance
(PMI). Because the insurance is private
the underwriting guidelines are a little tighter than that of the Government
insured loans like FHA. Traditionally FHA insured loans have had the
full faith of the Federal Government backing these loans making them more
desirable for banks to sell the loans to each other. Thus, interest rates on these loans are
little lower than their Conventional counterparts and the underwriting criteria
for FHA loans are little easier as well.
So, if you have a lower FICO score (550-660) FHA will probably be your
best bet as there are not additions to the interest rate with lower credit
scores with the FHA loans. FHA does come
with mortgage insurance, however, with the higher Loans to Value loans it still
is a lower payment than a conventional loan.
Both FHA and Conventional loans now
do not require a termite report and clearance unless it is asked for in the
Real Estate Contract making both loans flexible for home buyers in a tight Real
estate market or if buyers are willing to buy light fixers. The Veterans Administration loans or VA loans
are only for those that have served in the military and have the eligibility required
(usually 4 years in) to qualify. The benefits
of being able to use a VA loan are great, besides the fact that the Veteran
does not have to put any money down at all it is fairly easy to qualify for the
payment as interest rates are low for these loans, as well. VA loans will take Veterans with credit scores
as low a 550 with no money down and no mortgage insurance. These are all considered Qualified Mortgages
in the Government’s eyes and will require certain waiting periods to ensure
borrowers have the ability to shop and compare and make sure the loan being
offered them is good for their situation.
Another option for home buyers under the Primary Residence
type of loan is the Bank Statement qualifying loan. These types of loans are still considered
Conventional loans as they are privately underwritten. They are specifically designed to provide an
alternative way of qualifying as opposed to the traditional way of having to provide
Federal Tax Returns. These loans will require
a borrower to provide 12-24 months of bank statements from their personal or
business accounts or both. They will be
qualified by averaging their deposits and taking out a certain expense number
and that will be the income that will be used to qualify them. As it still falls under QM loans these loans
are required to make sure the borrower has the means to make their mortgage
payment that they are applying for. Due to
the fact that Private Mortgage insurance companies will only underwrite under
traditional income qualifying guidelines these loans will require a 20% or more
down payment. As they are considered “higher
risk” loans and interest rates are bit higher than Traditional Conventional loans and
Lastly, we need to cover a sector of the market that is
almost considered “Underground Funding” and that is Private Money Loans or Hard Money loans as they have been called traditionally. Private Money loans are for those investors
that don’t qualify for financing under traditional bank guidelines. Hard Money loans are used primarily on
investment property both Residential and Commercial properties. These loans are arranged by mortgage brokers
with private funds from private investors (individuals) and hedge funds. The borrower is not scrutinized as much as
the property is under this type of funding and the bigger the equity position
is the better chances are that an investor will fund the project. The minimal investment required to get a
Private Money Loan or Hard Money loan is 30% of the project’s value or purchase
price. whichever is less. These loans
can be used to purchase Residential, Commercial, Industrial, Mixed-Use, Land,
Construction projects, Churches and those properties that Banks tend to shy
away from. Hard Money loans can be used
to refinance an existing project, or provide funds for construction.
There are many different types of loans available today and
can be used for many purposes. Here at
MAE Capital Mortgage we have all these loans available. Not only do we have these loans available we
have experts in guiding you to the right loan product. As we are a Mortgage Broker we are also
limited by the government on the amount we can charge for certain products thus
making our loan interest rates and fees the best in the market. We work with direct lenders and get what is
called a wholesale interest rate which is lower than a retail interest rate you
would get from a Banker or direct lender and we pass those saving on to
you. We know you have options out there
and I would advise that you work with a team like MAE Capital Mortgage that has
decades of experience that will be passed on to you in the form of knowledge
and reduced costs and fees. Please call our offices is you have any
questions regarding these loans or Real Estate we welcome the opportunity to
help you with this process. MAE Capital Mortgage 916-672-6130 or www.maecapital.com.
Are you planning on buying a home in the near future or currently looking to buy a house? If you are, you need to know to know how to save money. It is a little-known fact that here in California a Broker can sell Real Estate and arrange the financing of it. This may not sound that earth shattering on first look but if you find this article you found a company that has been doing this service for years. Some people in the industry believe that you can’t legally do both and those people would be wrong. There are very few of us that have the expertise to handle both functions and the licensing to do it. As a California Real Estate Broker you can act as an Agent representing buyers and sellers of real estate and represent them in the loan transaction if you hold the proper National Mortgage Licensing System (NMLS) license.
Why would this matter in a Real Estate transaction? It won’t matter if the company that holds these licensing does not utilize them to save their client’s money. Here at MAE Capital Real Estate and Loan we believe, first and foremost, that saving our customers money is one of the major reasons we even take on both functions. So how does that work you ask? Which is a great question. This works whether you are a seller or a property then a buyer of another one or if you are a first-time buyer. You see we will take the commission generated from the Real Estate commission and apply it towards you home loan to lower your interest rate thus lowering your monthly payment. We also will buy your home warranty on the purchase of your new home saving you thousands in potential work repairs.
Not only does this process work in saving you thousands of dollars you will only have to make one phone call or email to find out what is going on with your home and how the loan is doing. Traditionally, you will generally use a Realtor that does nothing but the Real Estate function and has no real ties with the loan company doing your home loan. This can cause communication problems and slow a transaction down trying to get a ahold your Loan Officer and or your Realtor. Under MAE Capital’s system you make one phone call and you can find out what is going on with the house and the loan and the sale if you are selling a home in addition. With all the functions under one roof the transactions will be far more efficient for all involved. If you were to ask an Agent their number one complaint with the business they would say the communication issues with Loan Officer and other Agents in the transaction. If they are all under the same roof everyone is held accountable to get the job done efficiently.
What makes this legal is that MAE Capital Mortgage, dba Mae Capital Real Estate and Loan is licensed under the California Bureau of Real Estate (BRE)not the Department of Business Oversight (formally the Department of Corporations, DBO). Most Mortgage Companies that you will talk to are licensed under the DBO which only allows Mortgage Companies to do loans, whereas, the BRE allows you to do many functions with your Broker License. So why are there only a few firms like MAE Capital that does both you ask? The answer is fairly simple, as a Loan Officer working under the DBO you can make up to 3% in commission per loan and under the BRE you can only make 3% as a company as a whole on the loan. That looks the same you say. It looks the same but is very different. You see a Mortgage company under the DBO allows a Loan Officer to make that kind of commission after the company has made their profit and if you are dealing with a branch of a larger company that branch will also have to make money to stay open so you have 3 to 4 layers of profit centers before it gets to you the consumer. With a Mortgage Broker we deal direct with the main company (No Branch) and no other loan officers so we cut out 2 layers of profit, making our interest rates points and fees far less than a large company. Then the large company cannot give you money towards the purchase of your home as that is not legal under the DBO but under the BRE you can give back to your customers towards costs and fees all day long saving clients thousands of dollars. This is why MAE Capital Real Estate and Loan came into existence to save our client money and make the process more efficient.
Here at MAE Capital Real Estate and Loan we call this “Service Bundling” designed to save our clients thousands of dollars and hours of time in their transactions. This is not a new concept it just has been refined by MAE Capital Real Estate and Loan. If you are looking Sell then Buy a new home in the Greater Sacramento area or Placer or El Dorado Counties we are here to help. For those professional that would like to explore the possibility of being more efficient you should contact us for a free overview. This is the best kept secret in the Real Estate Industry today and your Agent that doesn’t work for MAE Capital will try to change your mind as they work on commission. We are here to help those that have little knowledge of Real Estate and Lending. At MAE Capital we have over 50 years’ experience in both Real Estate and Home Loans and invite you to call us to today to learn more about how we can save you Time and Money. Call and talk with one of our licensed Agents today at 916-672-6130 we look forward to helping you with your Real Estate needs.
Is it time to bring back loans that people don’t have to fully income or credit qualify for? I believe it is, for no other reason than the current environment cuts out an entire section of the US economy from qualifying for a good loan. The self-employed borrower is being left behind with the current lending rules. The self-employed borrower is a broad reaching term that applies to people that derive their income from partly or entirely from a source that does not require the withholding of taxes. This includes people on commission as a part of their income or their entire income. Another section of potential borrowers that are being left behind are those with less than perfect credit and a high down payment or high equity positions.
The idea of tight underwriting criteria is to keep the foreclosure rate low and to protect potential borrowers from themselves over committing themselves on a mortgage. In the past, lenders were left to their own when determining risks associated with lending money to potential borrowers. It has pretty much always held true that the more money, or equity, a potential borrower has into their home the less likely they will default on their mortgage. Even during the mortgage crisis of 2005-2011 we found that the folks that had a high investment into their homes initially were far less likely to default on their mortgage. After the crisis and with the onset of the Dodd Frank Act that put law into the mortgage risk assessing business we are finding that those folks that have the ability to save from their self-employed jobs are being discriminated against for no other reason than being a true American by using a tax accountant to prepare their taxes and writing off more things than a salaried employee can. This affect can be attributed to the current tax code that allows people write off business related expenses off their income thus reducing the amount of income a lender can use to qualify them. Currently even with a substantial down payment, 20% or more, if the self- employed borrower does not show enough income, net of expenses, they will not be allowed to get a traditional loan under the Dodd Frank laws.
This holds true for those that have a lower than acceptable credit score with a high down payment or equity position. I would contest to say that if a borrower can put a large down payment, 20% or more, they would be less likely to walk away from their mortgage even if the house devalued by 10-20% in the first few years after purchasing. We have seen over time that Real Estate, over the long run will continue to rise at a rate as high, or in most cases, higher than inflation. What this means is that people with large down payments have shown a commitment to the house they are purchasing for the long term. I would contend that even though a potential borrower may have a less than acceptable credit history for a low down payment loan that they should be able to be able to buy a home with a large down payment as they will tend to find ways to make the payments so they don’t lose their investment.
Good news, there is hope for these underserved borrowers out there. We have seen an increase in investors that see loopholes in the law that will allow for these underserved folks to be able to purchase a home. The Dodd Frank law states that “a borrower must show the ability to repay the mortgage”. FNMA and FHLMC (Fannie Mae and Freddie Mac) have interpreted that to mean that all loans securitized by them must explore all income verification sources such as Tax Returns, Pay-stubs, W2s, 1009’s, for all borrowers on the loan. Currently if a borrower fails to provide any one of those documents that support an income needed, the borrower is declined from those loans. The good news is that some new innovative lenders, even with the support from Wall Street hedge funds, are providing loans to those that have similar situations.
The laws state that if you are going to do a qualified mortgage (a home loan for a primary residence) you must show the borrower’s ability to repay that mortgage or verify their income. This can be done by other ways than tax returns, W2s and paystubs, as no two borrowers created equally, everybody is different. So to discriminate on those that don’t show income on their tax returns when they obviously are making income is ridiculous. There are other ways to prove income such as showing regular deposits made to a bank account, or show enough assets that could pay the mortgage off, or simply listening to a borrower on their thoughts of how they plan to repay the loan based on the large down payment they would be making. The market place is coming up with new ideas every day to stay within the law. Alternate income loans are going to be the future for those that cannot show proof of income through traditional sources and we have those Alternate Income Loans Available today.
Alternate income loans vary greatly from source to source that is why here at MAE Capital Mortgage Inc. we take care in making sure our alternate income lenders are everything they say they are. We have several Alternate income sources that will use bank statements for the last 12 to 24 months and average the deposits. The borrowers that can show a good deposit history will tend to get the best alternate income rates on their primary home. All the Alternate Income sources have graduated tiers for credit scores, and down payment or loan to value. What this means is that if you have a large down payment, good deposit history in the bank and you have a good credit score you will get the bests alternate loan rates. The rates will vary to the degree of risk. So on the other hand if you have poor credit you will be required to put a larger down payment or have a larger equity position for a refinance in order to get an alternate income type of loan. The Alternate income loans will require at least a 20% down, or equity position, to obtain this type of loan as the loan is not sold to FNMA FHLMC. There will be plenty of cases where people should not attempt to purchase at this time if their credit is too bad, or they just don’t have a good source of income, or they don’t have the saving to put into purchasing a home.
The Alternate Income loans are designed to fill the gaps where the banks will not lend. Most Alternate Income Borrowers are those that feel that they can make a mortgage payment with the income they are currently making, and have saved a good amount of money, and have good credit. Banks don’t offer these types of loans for a variety of reasons, so you will have to use MAE Capital Mortgage to find the alternate funding sources that will fit your needs. We are licensed by the department of Real Estate and we hold a NMLS license and that makes us uniquely qualified to be able to Broker loans to those funding sources. Our job is to find the best source for your particular situation and match the borrower with lender. We are limited by law on what can be charged on Alternate Money transactions as these loans are on your primary residence, so you know you will be taken care of when we do this type of loan for you or any loan for that matter. Our job, when working with our borrowers, is to find the best funding source for you, the borrower, for your particular needs and or challenges and if you do fit the box for a FNMA or FHLMC or FHA or VA loan we will certainly fit you into the best deal possible. If you have been faced with being declined for a loan from a Bank or a Mortgage Banker give us a call today and we will see if we can fit you into an Alter Income Loan. Again thanks for reading and You can call us today at 916-672-6130.